Chapter Duration - rld.state.nm.us NAR 114 Senior's Real Es… · Chapter Duration Introduction 30 minutes Chapter 1: Generations 45 minutes ... How Do Reverse Mortgages Work?.....

Senior Real Estate Specialist® Course Timed Outline

Version 2.3 (2018) page 1 of 7

Day One Chapter Duration

Introduction 30 minutes

Chapter 1: Generations 45 minutes

Chapter 2: The 50+ Market 55 minutes

Chapter 3: 21st Century Retirement 60 minutes

Chapter 4: Aging in Place 75 minutes

Chapter 5: Independent Living 60 minutes

Chapter 6: Housing Options for Assistance 90 minutes

Day Two Chapter Duration

Chapter 7: Financing Options 75 minutes

Chapter 8: Tax Matters 50 minutes

Chapter 9: Legal Matters 50 minutes

Chapter 10: Marketing and Outreach 80 minutes

Chapter 11: Working with Buyers and Sellers 80 minutes

Chapter 12: Building a Team and Resource Bank 30 minutes

Exam 60 minutes

Total Instruction Time (exam not included) .................................

780 minutes, (13 hours)



Suggested Time Schedule Day One

Chapter Suggested Time Schedule Duration

Introduction 8:30 am - 9:00 am 30 minutes

1: Generations 9:00 am - 9: 45 am 45 minutes

2. The 50+ Market 9:45 pm - 10:10 am 25 minutes

Break 10:10 am - 10:30 am 20 minutes

2. The 50: Market (cont’d) 10:30 am - 11:00 am 30 minutes

3. 21st Century Retirement 11:00 am - 12:00 pm 60 minutes

Lunch Break 12:00 pm - 1:00 pm 60 minutes

4. Aging in Place 1:00 pm - 2:15 pm 75 minutes

Break 2:15 pm - 2:30 pm 15 minutes

5. Independent Living 2:30 pm - 3:30 pm 60 minutes

6. Housing Options for Assistance 3:30 pm – 5:00 pm 90 minutes

Day Two

Chapter Suggested Time Schedule Duration

7. Financing Options 8:30 am - 9:45 am 75 minutes

8.Tax Matters 9:45 m - 10:35 am 50 minutes

Break 10:35 am - 10:50 am 15 minutes

9. Legal Matters 10:50 am - 11:40 pm 50minutes

10. Marketing and Outreach 11:40 am - 12:00 pm 20 minutes

Lunch Break 12:00 pm - 12:40 pm 40 minutes

10. Marketing and Outreach (cont’d.) 12:40 pm - 1:40 pm 60 minutes

11. Working with Buyers and Sellers 1:40 pm - 2: 40 pm 60 minutes

Break 2:40 pm – 3:00 pm 20 minutes

11. Working with Buyers and Sellers (cont’d.) 3:00 pm - 3:20 pm 30 minutes

12. Building a Team and Resource Bank

Exam 60 minutes



Introduction Duration

Course Learning Goal ............................................................................................

15 minutes Learning Objectives ............................................................................................... Seniors Real Estate Council ................................................................................... Earning the SRES® Designation ............................................................................. SRES® Members-Only Benefits ............................................................................. Icebreaker Exercise: Memory Map ....................................................................... 15 minutes

Total 30 minutes Chapter 1. Generations Duration Generations ........................................................................................................... 15 minutes Six Living Generations .......................................................................................... 15 minutes Test Your Generation IQ ....................................................................................... 10 minutes Knowledge Base for the Course ............................................................................ 5 minutes

Total 45 minutes Chapter 2: The 50+ Market Duration Myths and Realities of Aging ................................................................................ 20 minutes Understanding How We Age................................................................................. 5 minutes Working with Matures .......................................................................................... 10 minutes Working with Boomers ......................................................................................... 10 minutes The Client Across the Desk.................................................................................... 3 minutes Working with Gen-X and Gen-Y ............................................................................ 2 minutes Exercise: Generations ........................................................................................... 5 minutes

Total 55 minutes Chapter 3: 21st Century Retirement Duration Changing Concept of Retirement .......................................................................... 15 minutes Impact of Economic Evets ..................................................................................... 5 minutes Households and Homeownership ......................................................................... 15 minutes Increasing LGBT Cultural Competence ................................................................. 10 minutes Housing Choices .................................................................................................... 15 minutes

Total 60 minutes



Chapter 4: Aging in Place Duration Plan for Aging in Place .......................................................................................... 5 minutes Planning Continuum for Aging in Place ................................................................ 10 minutes Aging in Place: The Community ............................................................................ 10 minutes Aging in Place: The Home ..................................................................................... 10 minutes Universal-Design Standards .................................................................................. 5 minutes Adapting a Home for Aging in Place ..................................................................... 20 minutes Make a SAFE Plan for Aging in Place ..................................................................... 10 minutes Opportunities for Real Estate Professionals ......................................................... 5 minutes

Total 75 minutes

Chapter 5: Independent Living Duration The Housing Cycle ................................................................................................. 10 minutes Active-Adult Communities .................................................................................... 15 minutes Seniors Apartments .............................................................................................. 10 minutes Cohousing ............................................................................................................. 5 minutes Age-Restricted Communities ................................................................................ 10 minutes Housing for Older Persons Act (HOPA) ................................................................. 10 minutes

Total 60 minutes Chapter 6: Housing Options for Assistance Duration When Is It Time to Make a Change ....................................................................... 10 minutes Downsizing ............................................................................................................ 15 minutes Congregate Living .................................................................................................. 5 minutes Assisted Living ....................................................................................................... 10 minutes Continuing Care Retirement Communities ........................................................... 20 minutes Skilled Nursing Facilities ........................................................................................ 5 minutes More Care Options ................................................................................................ 5 minutes What will Medicare or Medicaid Pay For? ............................................................ 20 minutes

Total 90minutes



Chapter 7: Financing Options Duration Do These Scenarios Sound Familiar? ....................................................................

5 minutes What Can a Reverse Mortgage Accomplish? ........................................................ How Do Reverse Mortgages Work? ...................................................................... 5 minutes Types of HECMs .................................................................................................... 3 minutes HECM Eligibility ..................................................................................................... 5 minutes Counseling—the Important First Step .................................................................. 5 minutes HECM Application Process .................................................................................... 5 minutes Principal Limits and Costs ..................................................................................... 3 minutes Reverse Mortgage Alternatives ............................................................................ 2 minutes Reverse Mortgage Benefits ................................................................................... 5 minutes When Is a Reverse Mortgage Not a Good Idea?................................................... 3 minutes Who Owns the Property? ..................................................................................... 3 minutes What Happens to the Non-Borrowing Spouse of the Borrower Dies? ................. 3 minutes What Do Heirs Receive ......................................................................................... 5 minutes More FAQs About Reverse Mortgages ................................................................. 3 minutes Scenarios ............................................................................................................... 10 minutes Family Issues ......................................................................................................... 5 minutes Opportunities for the Real Estate Professional .................................................... 5 minutes Selling or Buying a Reverse Mortgaged Home

Total 75 minutes Chapter 8: Tax Matters Duration Declaring a Domicile ............................................................................................. 5 minutes Understanding Capital Gains Tax ..........................................................................

5 minutes Capital Gains Tax on Primary Residences ............................................................. Capital Gains Tax on the Sale of a Converted Second Home ............................... Estate Tax Issues ...................................................................................................

5 minutes Gift Tax .................................................................................................................. Generation-Skipping Transfer Tax ........................................................................ Can an IRA Own Real Estate? ................................................................................ 5 minutes Tax-Deferred 1031 Exchanges ..............................................................................

15 minutes

Basic Rules for Tax-Deferred 1031 Exchanges ...................................................... Exchanging a Vacation Home ................................................................................ Personal Residence Received in an Exchange ...................................................... Qualified Intermediaries (QIs) .............................................................................. Why Exchanges Fail ............................................................................................... Community Property............................................................................................. 5 minutes Taxes on Social Security and Pension Income ...................................................... 5 minutes Installment Sales ................................................................................................... 5 minutes

Total 50 minutes



Chapter 9: Legal Matters Duration Risk Management Issues ....................................................................................... 5 minutes Confidentiality ....................................................................................................... 5 minutes Selling Below Market ............................................................................................ 5 minutes Power of Attorney ................................................................................................. 5 minutes Guardians, Conservators, and Executors .............................................................. 5 minutes Competency Issues ............................................................................................... 10 minutes When a Client Dies or Becomes Incapacitated ..................................................... 5 minutes Probate ..................................................................................................................

5 minutes Life Estates and Trusts .......................................................................................... Elder Law Attorney ...............................................................................................

5 minutes Checklist for Selecting an Attorney .......................................................................

Total 50 minutes Chapter 10: Marketing and Outreach Duration The Half-Century Consumer ................................................................................. 10 minutes Prospecting Strategies .......................................................................................... 10 minutes Lawful Targeting .................................................................................................... 5 minutes Your Value Proposition ........................................................................................ 5 minutes Exercise: Your Value Proposition—Why Choose Me? .......................................... 15 minutes Exercise: Market Outreach ................................................................................... 5 minutes Seminars and Presentations ................................................................................. 10 minutes 3-Minute Brainstorming Challenge ....................................................................... 10 minutes Your Digital Presence ............................................................................................ 5 minutes SRES Marketing Support ....................................................................................... 5 minutes

Total 80 minutes Chapter 11: Working with Buyers and Sellers Duration Providing Assurance ............................................................................................. 5 minutes Case Study: On the Go ......................................................................................... 5 minutes The FORD Interview, Exercise: FORD Interview .................................................... 10 minutes The Big Questions ................................................................................................. 5 minutes Exercise: The Real Meaning .................................................................................. 5 minutes Understanding Needs and Capabilities ................................................................. 10 minutes Viewing and Showing Properties .......................................................................... 10 minutes Sensitivities ........................................................................................................... 5 minutes Involving Family Members .................................................................................... 10 minutes Recognizing Elder Abuse and Neglect ................................................................... 5 minutes Schemes and Scams .............................................................................................. 2 minutes Data Security Planning .......................................................................................... 3 minutes Emotional Impact on the Real Estate Professional ............................................... 5 minutes

Total 80 minutes



Chapter 12: Building a Team and Resource Bank Duration Building Your Team ............................................................................................... 15 minutes More Services........................................................................................................ 5 minutes Organizing a Resource File .................................................................................... 5 minutes Making Prudent Referrals to Experts .................................................................... 5 minutes

Total 30 minutes Exam ............................................................................................................. 60 minutes

SRES® Designation Course Course Description and Outline

V2.3 page 1 of 8

Course Learning Goal The SRES Designation Course helps real estate professionals develop the business-building skills and resources for specialization in the 50+ real estate market by expanding knowledge of how life stages impact real estate choices, connecting to a network of resources, and fostering empathy with clients and customers.

Learning Objectives

Module 1: Generations

Identify demographic generational groups based on age.

Distinguish generational characteristics of demographic groupings of the 50+ market.

Compare generational groupings within your firm and family.

Module 2: The 50+ Market

Challenge stereotypies about older adults’ activities and interests.

Apply dos and don’ts when striving to gain and serve the 50+ market.

Adapt your communications and interpersonal approach to match generational expectations and preferences.

Module 3: 21st Century Retirement

Consider how economic challenges affect retirement plans.

Identify issues and factors that influence older adult’s decisions to sell or buy a home or choose a community.

Apply knowledge of how household composition impacts retirement plans and housing choices to better serve clients and customers.


V2.3 page 2 of 8

Module 4: Aging in Place

Acquaint clients and customers with desirable community and home features for again in place.

Help clients and customers evaluate the adaptability, safety, and suitability of a home for aging in place.

Evaluate the livability of a market area’s communities and neighborhoods for aging in place.

Module 5: Independent Living

Apply knowledge of age-based homeownership cycle in order to help clients and customers find homes that fit their preferences, life stage, and needs.

Research senior-oriented communities, developments, and housing options in y our market area and opportunities for real estate professionals.

Alert clients and customers interested in age-restricted communities of eligibility requirements, regulations, and restrictions.

Module 6: Housing Options for Assistance

Distinguish between types of elder housing options that offer assistive services.

Provide clients and customers and their families with helpful insights based on your experience of how others have made the transition to housing with assistive services.

Suggest strategies for downsizing and decluttering.

Module 7: Financing Options

Identify situations in which a home equity conversion (HECM) mortgage would be helpful and appropriate.

Alert clients and customers and their families to the benefits, uses, pros and cons of HECMs and alternatives.

Identify issues involved in listing or representing a buyer interested in a home with a HECM.


V2.3 page 3 of 8

Module 8: Tax Matters

Gain an overview of tax issues of concern for 50+ clients and customers.

Recognize situations in which a tax-deferred 1031 exchange is possible and advantageous.

Alert clients and customers to tax issues that could impact spouses, partners, and heirs.

Module 9: Legal Matters

Avoid inappropriate involvement in family matters and maintain focus on the real estate transaction.

Manage potential legal liabilities and avoid conflicts of interest in real estate transactions.

Maintain confidentiality of information when providing services for 50+ clients and customers and their families.

Module 10: Marketing and Outreach

Develop business-building outreach methods for communicating and gaining the 50+ market.

Adapt presentation and counseling methods for 50+ buyers and sellers.

Integrate social media effectively to serve the 50+ market.

Module 11: Working with Buyers and Sellers

Develop services that win and sustain client and customer relationships and position you as a trusted real estate advisor.

Counsel clients on preparing and staging a property for sale.

Warn clients and customers of financial schemes and scams that target the elderly.


V2.3 page 4 of 8

Module 12: Building a Team and Resource Bank

Assemble a team of experts to help you serve 50+ clients and customers.

Compile a knowledge bank about your market area’s housing options, programs, resources, and services for 50+ clients.

Use your knowledge bank as a business-building tool.

Outline Introduction

Course Learning Goal

What You Will Learn

SRES® Council

Earning the SRES® Designation

SRES® Member Benefits

Knowledge Base for the Course


Generations

Test Your Generation IQ


Myths and Realities of Aging

Understanding How We Age

The Client Across the Desk

Working with Gen X and Gen Y

Exercise: Generations

Exercise: Interview Your Elders


Changing Concept of Retirement

Impact of Economic Events

Households and Homeownership

Increasing LGBT Cultural Competence

Housing Choices

Home—Asset or Anchor?


V2.3 page 5 of 8


Plan for Aging in Place

Planning Continuum for Aging in Place

Aging in Place: The Community

Retiring to Your Home

Aging in Place—The Home

Universal Design Standards

Adapting a Home for Aging in Place

Make a SAFE Plan for Aging in Place

Opportunities for Real Estate Professionals


The Housing Cycle

Active Adult Communities

Seniors Apartments

Cohousing

Age-Restricted Communities

Housing for Older Persons Act


When Is It Time to Make a Transition?

Downsizing

Congregate Living

Assisted Living

Continuing Care Retirement Communities

Skilled Nursing Facilities

More Care Options

What Will Medicare or Medicaid Pay For?


V2.3 page 6 of 8


What Can a Reverse Mortgage Accomplish?

How Do Reverse Mortgage Work?

Types of HECMs

HECM Eligibility

Counseling—The Important First Step

HECM Application Process

Principal Limits and Costs

HECM Fact Sheet

Reverse Mortgage Alternatives

Reverse Mortgage Benefits

When Is a Reverse Mortgage Not a Good Idea?

Who Owns the Property?

What Happens to the Non-Borrowing Spouse if the Borrower Dies?

What Do Heirs Receive?

More FAQs about Reverse Mortgages

Scenarios

Family Issues

Opportunities for the Real Estate Professional

Selling or Buying a Reverse Mortgaged Home


Declaring a Principal Residence

Understanding Capital Gains Tax

Capital Gains Tax on Sale of Principal Residences

Capital Gains Tax on Sale of Converted Second Homes

Estate Tax Issues

Gift and Generation-Skipping Tax

Can an IRA Own Real Estate?

Tax-Deferred 1031 Exchanges

Basic Rules for Tax-Deferred 1031 Exchanges

Exchanging a Vacation Home

Personal Residence Received in an Exchange

Case Study

Qualified Intermediaries


V2.3 page 7 of 8

Why Exchanges Fail

Community Property

Taxes on Social Security and Pension Income

Installment Sales


Risk Management Issues

Confidentiality Issues

Selling Below Market

Power of Attorney

Conservators, Guardians, and Executors

Competency Issues

When a Client Dies or Becomes Incapacitated

Probate

Life Estates and Trusts

Elder Law Attorney


The Half-Century Consumer

Prospecting Strategies

Lawful Target Marketing

Six Marketing Strategies for the 50+ Market

Your Value Proposition

Exercise: Your Value Proposition—Why Choose Me?

Exercise: Market Outreach

Seminars and Presentations

3-Minute Brainstorming Challenge

Your Digital Presence


Providing Assurance

The FORD Interview

Exercise: FORD Interview

The Big Questions

Exercise: The Real Meaning

Understanding Needs and Capabilities


V2.3 page 8 of 8

Viewing and Showing Properties

Sensitivities

Involving Family Members

Recognizing Elder Abuse and Neglect

Schemes and Scams

Data Security Planning

Emotional Impact on the Real Estate Professional


Building Your Team

More Services

Organizing a Resource File

Making Prudent Referrals to Experts

Resources

Websites

Magazines and Ezines

Books

Converting a Second Home to a Primary Residence

i

Instructor and Student Manual Version 2.3

ii

iii

Copyright © 2015, 2018, SRES® Council

Version 2.3

Published by the National Association of REALTORS®. All rights reserved. The National Association of

REALTORS® owns these materials or have been granted permission from the copyright owners to

distribute and reproduce them. Authorization is limited to view, store or print these materials for

personal and non-commercial use only. No part of these materials may be reproduced, in any form or by

any means, without permission in writing from the National Association of REALTORS®.

IMPORTANT NOTE: The SRES® Council and National Association of REALTORS®, its faculty, agents, and

employees are not engaged in rendering legal, accounting, financial, tax, or other professional services

through these course materials. If legal advice or other expert assistance is required, the student should

seek competent professional advice.

National Association of REALTORS®

SRES® Council

430 North Michigan Avenue

Chicago, IL 60611-4087

USA

800-500-4564

[email protected]

www.seniorsrealestate.com

mailto:[email protected]

http://www.seniorsrealestate.com/

iv

ACKNOWLEDGMENTS

The SRES® Council would like to express appreciation to the following for their participation and

contributions to the course revision process:

Larry Anderson

ABR, GRI, CRS, e-Pro, SFR, GREEN, BPOR, SRES®, REEA, TRC

Fairfax, Virginia

Jeff Berger

NAGLREP Founder and CEO

Skip Frenzel

SRES®, GRI, CRS, GHS™, CSA®, CFP®, CLTC, CMFC

Campbell, California

Kelly Kent

M.U.P

Director of National LGBT Elder Housing Initiative, SAGE

Patti Ketcham

CRS, GRI, CLG, AHWD™, e-PRO, MRP, FMS, SRES®

Tallahassee, Florida

Dr. Nii-Quartelai Quartey

AARP Senior Advisor and National LGBT Liaison

v

TABLE OF CONTENTS

Introduction ......................................................................................................................................1

Course Learning Goal ................................................................................................................................ 3

What You Will Learn ................................................................................................................................. 3

Activities and Class Procedures ................................................................................................................. 6

SRES® Council ............................................................................................................................................. 6

Earning the SRES® Designation .................................................................................................................. 6

SRES® Member Benefits ............................................................................................................................ 7

Knowledge Base for the Course ................................................................................................................ 9

Module 1: Generations .................................................................................................................... 11

Generations ............................................................................................................................................. 13

Six Living Generations ............................................................................................................................. 15

Test Your Generation IQ ......................................................................................................................... 16

Module 2: The 50+ Market ............................................................................................................... 19

Myths and Realities of Aging ................................................................................................................... 21

Understanding How We Age ................................................................................................................... 27

The Client Across the Desk ...................................................................................................................... 30

Working with Gen X and Gen Y ............................................................................................................... 31

Exercise: Generations ............................................................................................................................. 33

Exercise: Interview Your Elders ............................................................................................................... 34

Module 3: 21st Century Retirement ................................................................................................... 35

Changing Concept of Retirement ............................................................................................................ 37

Impact of Economic Events ..................................................................................................................... 39

Households and Homeownership ........................................................................................................... 40

Increasing LGBT Cultural Competence .................................................................................................... 44

Housing Choices ...................................................................................................................................... 46

Home—Asset or Anchor? ........................................................................................................................ 49

Module 4: Aging in Place .................................................................................................................. 51

Plan for Aging in Place ............................................................................................................................. 53

Planning Continuum for Aging in Place ................................................................................................... 54

Aging in Place: The Community .............................................................................................................. 55

vi

Retiring to Your Home ............................................................................................................................ 56

Aging in Place—The Home ...................................................................................................................... 61

Universal Design Standards..................................................................................................................... 62

Adapting a Home for Aging in Place........................................................................................................ 64

Make a SAFE Plan for Aging in Place ....................................................................................................... 67

Opportunities for Real Estate Professionals ........................................................................................... 68

Module 5: Independent Living .......................................................................................................... 69

The Housing Cycle ................................................................................................................................... 71

Active Adult Communities ...................................................................................................................... 72

Seniors Apartments ................................................................................................................................. 74

Cohousing ................................................................................................................................................ 75

Age-Restricted Communities .................................................................................................................. 76

Housing for Older Persons Act ................................................................................................................ 77

Module 6: Housing Options for Assistance ........................................................................................ 79

When Is It Time to Make a Transition? ................................................................................................... 81

Downsizing .............................................................................................................................................. 82

Congregate Living .................................................................................................................................... 86

Assisted Living ......................................................................................................................................... 87

Continuing Care Retirement Communities ............................................................................................. 88

Skilled Nursing Facilities .......................................................................................................................... 90

More Care Options .................................................................................................................................. 91

What Will Medicare or Medicaid Pay For? ............................................................................................. 94

Module 7: Financing Options ............................................................................................................ 97

What Can a Reverse Mortgage Accomplish? ........................................................................................ 100

How Do Reverse Mortgage Work? ....................................................................................................... 101

Types of HECMs .................................................................................................................................... 102

HECM Eligibility ..................................................................................................................................... 103

Counseling—The Important First Step .................................................................................................. 104

HECM Application Process .................................................................................................................... 107

Principal Limits and Costs ..................................................................................................................... 108

HECM Fact Sheet ................................................................................................................................... 110

Reverse Mortgage Alternatives ............................................................................................................ 112

vii

Reverse Mortgage Benefits ................................................................................................................... 112

When Is a Reverse Mortgage Not a Good Idea? .................................................................................. 113

Who Owns the Property?...................................................................................................................... 114

What Happens to the Non-Borrowing Spouse if the Borrower Dies? .................................................. 114

What Do Heirs Receive? ........................................................................................................................ 114

More FAQs about Reverse Mortgages .................................................................................................. 115

Scenarios ............................................................................................................................................... 117

Family Issues ......................................................................................................................................... 122

Opportunities for the Real Estate Professional .................................................................................... 122

Selling or Buying a Reverse Mortgaged Home ...................................................................................... 123

Module 8: Tax Matters ................................................................................................................... 125

Declaring a Principal Residence ............................................................................................................ 127

Understanding Capital Gains Tax .......................................................................................................... 128

Capital Gains Tax on Sale of Principal Residences ................................................................................ 129

Capital Gains Tax on Sale of Converted Second Homes ....................................................................... 130

Estate Tax Issues ................................................................................................................................... 132

Gift and Generation-Skipping Tax ......................................................................................................... 133

Can an IRA Own Real Estate? ................................................................................................................ 134

Tax-Deferred 1031 Exchanges .............................................................................................................. 134

Basic Rules for Tax-Deferred 1031 Exchanges ...................................................................................... 136

Exchanging a Vacation Home ................................................................................................................ 138

Personal Residence Received in an Exchange ....................................................................................... 138

Case Study ............................................................................................................................................. 138

Qualified Intermediaries ....................................................................................................................... 141

Why Exchanges Fail ............................................................................................................................... 141

Community Property ............................................................................................................................. 142

Taxes on Social Security and Pension Income ...................................................................................... 143

Installment Sales ................................................................................................................................... 143

Module 9: Legal Matters ................................................................................................................ 145

Risk Management Issues ....................................................................................................................... 147

Confidentiality Issues ............................................................................................................................ 147

Selling Below Market ............................................................................................................................ 148

viii

Power of Attorney ................................................................................................................................. 149

Conservators, Guardians, and Executors .............................................................................................. 151

Competency Issues ............................................................................................................................... 153

When a Client Dies or Becomes Incapacitated ..................................................................................... 156

Probate .................................................................................................................................................. 156

Life Estates and Trusts .......................................................................................................................... 157

Elder Law Attorney ................................................................................................................................ 158

Module 10: Marketing and Outreach .............................................................................................. 161

The Half-Century Consumer .................................................................................................................. 163

Prospecting Strategies .......................................................................................................................... 165

Lawful Target Marketing ....................................................................................................................... 166

Six Marketing Strategies for the 50+ Market ........................................................................................ 168

Your Value Proposition ......................................................................................................................... 171

Exercise: Your Value Proposition—Why Choose Me? .......................................................................... 172

Exercise: Market Outreach ................................................................................................................... 173

Seminars and Presentations ................................................................................................................. 174

3-Minute Brainstorming Challenge ....................................................................................................... 178

Your Digital Presence ............................................................................................................................ 179

Module 11: Working with Buyers and Sellers .................................................................................. 183

Providing Assurance .............................................................................................................................. 185

The FORD Interview .............................................................................................................................. 187

Exercise: FORD Interview ...................................................................................................................... 188

The Big Questions ................................................................................................................................. 188

Exercise: The Real Meaning .................................................................................................................. 190

Understanding Needs and Capabilities ................................................................................................. 190

Viewing and Showing Properties .......................................................................................................... 191

Sensitivities ........................................................................................................................................... 192

Involving Family Members .................................................................................................................... 196

Recognizing Elder Abuse and Neglect ................................................................................................... 198

Schemes and Scams .............................................................................................................................. 199

Data Security Planning .......................................................................................................................... 200

Emotional Impact on the Real Estate Professional ............................................................................... 201

ix

Module 12: Building a Team and Resource Bank ............................................................................. 203

Building Your Team ............................................................................................................................... 205

More Services ........................................................................................................................................ 207

Organizing a Resource File .................................................................................................................... 208

Making Prudent Referrals to Experts .................................................................................................... 211

Resources ...................................................................................................................................... 215

Websites ................................................................................................................................................ 217

Magazines and Ezines ........................................................................................................................... 219

Books ..................................................................................................................................................... 220

Converting a Second Home to a Primary Residence ............................................................................. 221

x

Introduction

1

Introduction

SRES® Designation Course

2

Introduction

3

COURSE LEARNING GOAL The Seniors Real Estate Specialist (SRES®) Designation Course helps real estate

professionals develop the business-building skills and resources for

specialization in the 50+ real estate market by expanding knowledge of how life

stages impact real estate choices, connecting to a network of resources, and

fostering empathy with clients and customers.

WHAT YOU WILL LEARN



Distinguish generational characteristics of demographic groupings of the

50+ market.



Challenge stereotypes about older adults’ activities and interests.

Apply do’s and don’ts when working when striving to gain and serve the 50+

market

Adapt your communications and interpersonal approach to match

generational expectations and preferences.



Identify issues and factors that influence older adult’s decisions to sell or

buy and home choose a community.

Apply knowledge of how household composition impacts retirement plans

and housing choices to better serve clients and customers.

Slide 2: Introduction Slide 1: Course Learning Goal I-Note: REVIEW the course learning goal.

Slide 2: What You Will Learn I-Note: EXPLAIN how the course content is organized and the learning objectives, as appropriate.


4


Acquaint clients and customers with desirable community and home

features for aging in place.

Help clients and customers evaluate the adaptability, safety, and suitability

of a home for aging in place.

Evaluate the livability of market area’s communities and neighborhoods for

aging in place.


Apply knowledge of age-based homeownership cycle in order to help clients

and customers find homes that fit their preferences, life stage, and needs.

Research senior-oriented communities, developments, and housing options

in your market area and opportunities for real estate professionals.

Alert clients and customers interested in age-restricted communities of

eligibility requirements, regulations, and restrictions.


Distinguish between types of elder housing options that offer assistive

services.

Provide clients and customers and their families with helpful insights based

on your experience of how others have made the transition to housing with

assistive services.



Identify situations in which a home equity conversion (HECM) mortgage

would be helpful and appropriate.

Alert clients and customers and their families to the benefits, uses, pros and

cons of HECMs and alternatives.

Identify issues involved in listing or representing a buyer interested in a

home with a HECM.

Introduction

5



Recognize situations in which a tax-deferred 1031 exchange would be

possible and advantageous.

Alert clients and customers to tax issues that could impact spouses,

partners, and heirs.


Avoid inappropriate involvement in family matters and maintain focus on

the real estate transaction.

Manage potential legal liabilities and avoid conflicts of interest in real estate

transactions.

Maintain confidentiality of information when providing services for 50+

clients and customers and their families.


Develop business building outreach methods for gaining and communicating

with the 50+ market.




Develop services that win and sustain client and customer relationships and

position you as a trusted real estate advisor.

Counsel sellers on preparing and staging a property for sale.

Warn clients and customers of financial schemes and scams that target the

elderly.



Compile a knowledge bank about your market area’s housing options,

programs, resources, and services for 50+ clients.



6

ACTIVITIES AND CLASS PROCEDURES This course incorporates a variety of activities designed to involve students,

such as work group assignments, exercises, and discussions. Students are

strongly encouraged to ask questions and engage in class discussions and group

exercises. The range of experience levels among students offers a rich

opportunity for learning from peers. Your active involvement will enrich the

learning experience for yourself and others.

SRES® COUNCIL The SRES® Council, part of the NAR family, supports real estate professionals

who specialize in serving real estate buyers and sellers age 50 and older. The

SRES® Council connects you to a network of 16,000 referral partners. It positions

you as an expert contact for incoming referrals as 50+ buyers look for the

perfect retirement property and community; and a source of outgoing referrals

when past clients move to other locations. For the many who plan to stay close

to home as they downsize, upsize, and transition, NAR research shows that a

client’s friends and relatives are the leading sources of referrals.

EARNING THE SRES® DESIGNATION The SRES® designation is awarded to REALTORS® who successfully complete the

required education course. It is the only designation of its kind recognized by

NAR. The following three requirements must be met to attain the use of the

SRES® designation.

1. Complete the SRES® Designation Course.

2. Maintain active membership in the SRES® Council. The SRES® Designation Course fee includes 1 year’s membership in the SRES® Council (annual dues are $99 thereafter).

3. Maintain active membership in NAR or an international cooperating association.

Earn Credit for Other REALTOR® Designations

Completing the SRES® Designation Course also meets elective course

requirements for earning the Accredited Buyer’s Representative (ABR®) and

Certified Residential Specialist (CRS) designations.

Slide 5: SRES® Council

I-Note: DESCRIBE the SRES® Council and designation.

Slide 6: Earning the SRES® Designation

I-Note: SUMMARIZE SRES® designation requirements. INFORM students that a 1-year membership in the SRES® Council is included in the course fee. STATE that completing the SRES® Course qualifies for elective credit for the ABR® and CRS designations.

Exam Question 1

Slide 3: -Slide 4: SRES Member Benefits

Introduction

7

SRES® MEMBER BENEFITS

National recognition as an official NAR designation

The SRES® Professional, a quarterly eNewsletter with information about

senior-related issues, such as legislative initiatives, financial and legal

matters, and housing trends

Customizable SRES® consumer newsletters

Library of customizable marketing letters and scripts

Customizable, downloadable marketing materials: logos, brochures, ad

slicks, postcards, press releases, news articles, and more

Listing in a searchable online directory of SRES® designees, which can be

viewed by potential clients and referrals

Certificate and lapel pin

Consumer website (www.sres.org)

Moving On brochure and toolkit for your clients

Access to an online network of resources to support your business

Slide 7-8: SRES Member Benefits Slide 9: Business Partner Network (next page)

I-Note: CONVEY the benefits of the SRES® designation. NOTE that it is the only “seniors real estate” designation recognized by NAR. REFER to the Business Partner Network.

Visit the Seniors Real Estate

Specialist® website at

www.seniorsrealestate.com.

http://www.sres.org/


8

SRES®—A Market Distinction

When you distinguish yourself as a specialist in the 50+ market, you can

reference our network of professional resources that serve the needs of your

clients. Many of our partner organizations are industry leaders and provide

great references for education and tools to assist the needs of senior clients.

These organizations also provide users with the ability to find an SRES® on their

websites and provide discounted services to SRES® members. Please note, these

partnerships can be subject to change.

Introduction

9

KNOWLEDGE BASE FOR THE COURSE

Presentation of the course assumes that students have a foundation of

knowledge of certain real estate principles and laws.

REALTOR® Code of Ethics

From time to time, course content refers to articles and standards of

practice of the REALTOR® Code of Ethics. It is assumed that students know

how to apply these principles in day-to-day business conduct. During the

course, we will examine some of the distinct challenges involved in working

with clients and customers in the 50+ market, particularly some very elderly,

such as maintaining client confidentiality when other family members are

involved.

Fair Housing Laws

All the federally protected classes apply when working with the 50+ market.

Although federal statutes do not specify age as a protected class, some

states and municipalities do. And, as we will learn later in the course,

federal law provides an exemption from familial status that enables age-

restricted housing for residents age 55 and older.

Agency Representation

As the course is presented, issues involving client representation—sellers

and buyers—will be discussed. As with application of the Code of Ethics, real

estate professionals who work with 50+ market clients and customers may

encounter circumstances that appear to blur the lines of client

responsibility. The course will examine how to remain true to agency

representation principles, as defined by your state’s real estate laws, in

sensitive situations.

Slide 10: Knowledge Base for the Course

I-Note: EXPLAIN that the course presentation assumes students have foundational knowledge of the Code of Ethics, fair housing laws, and the state’s agency laws.


10


11



12


13

Do you know where your market is going? Visualize your market 10 years into

the future. Consider that in 2030:

More than one-third (37%) of the U.S. population will be age 50 or older.

All baby boomers will be age 65 or older.

The leading edge of Generation X will reach age 65.

As we will see throughout the course, demographic forces alone will shape your

future market as generations experience the life transitions—their own and

their parents'—that accompany aging.

The course focuses on the maturing generations that make up the 50+ market,

now and for the next decade. But, interaction with younger generations must be

considered because they are the young adults who may be involved in the real

estate decisions of their parents and elders. Of course, the baby boomers will be

a particular emphasis because for the next couple of decades they will make up

the most active 50+ market.

For ease of reference throughout the remainder of the course, the maturing

generations may be collectively referred to as “matures” or “elders” and the

specialty as the “50+ market.”

GENERATIONS The first challenge in studying the groups and individuals who make up the 50+

market is developing a set of workable definitions and satisfactory terminology.

Demographic statistics paint the picture of the maturing generations of home

buyers and sellers in terms of numbers. With the leading edge of the baby

boomer generation reaching its 70s, there may be a natural inclination to think

of the future of the mature real estate market in terms of that generational

cohort and its distinctive characteristics. However, to gain an in-depth

understanding of the senior market that can translate into business success for

the real estate professional, all the living generations should be defined not only

in terms of numbers and birth dates, but also in terms of attitudes, motivations,

lifestyle and work style, activity levels, health, future plans, retirement

readiness, and other characteristics.

Why is it helpful to look at generational commonalities and differences?

Although not a substitute for learning about clients’ and customers’ individual

preferences and lifestyles, generalizations can provide insight into what is

important to them, as well as how to best communicate and market to them,

with regard to their motivations, lifestyles, hopes, and fears.

Shared experiences of key events shape our outlooks and behaviors.

Demographers generally agree that events experienced in childhood, youth, and

I-Note: OBSERVE that demographic changes will shape the future market.

Slide 12: In 2030

Slide 13: Throughout This Course Slide 14: All Generations Must Be Considered

I-Note: INFORM students of the use of terms “matures,” “elders,” for the remainder of the course. EXPLAIN that the term “senior” is not always the best word choice in marketing communications.

Slide 15: Why Look at Generations?

I-Note: EXPLAIN the value of examining generational characteristics. CAUTION that it is not a substitute for learning about the individual.

Exam Question 2


14

young adulthood—the formative years—influence age-peers and shape

attitudes and viewpoints, interpersonal behavior, career and family priorities,

tastes, and other aspects of human behavior, both subtle and overt.

Generalizations can provide a frame of reference from which to start

understanding clients’ needs and preferences. For example, as we will see in the

material that follows, recommending an age-restricted community with lots of

planned activities may be a big turnoff for a baby boomer who views himself as

a rugged individualist, but it would be just the right choice for a member of the

older silent generation. Consider, too, that your client may be a member of the

generally cautious Silent Generation, but when it comes to making decisions

about real estate and housing options, the client’s skeptical Gen X children may

be very involved in making decisions about where and how their parents will

live.

A fast-growing segment of the population is nonagenarians, people in their 90s,

and centenarians, people age 100 or more. Census projections put the number

of nonagenarians at 3.3 million in 2030.1 Although a relatively small percentage

of the overall population, the increasing numbers of the very elderly will

challenge societal institutions’ adaptability, particularly in the areas of medical

care, long-term care, and housing. Nonagenarians and centenarians generally

keep a positive outlook and have an innate ability to “let go” of life’s sad events.

Let’s look at the characteristics of generations based on the U.S. Census Bureau

population data.

1 Projected 5-Year Age Groups and Sex Composition: Main Projections Series for the United States, 2017-2060, U.S. Census Bureau, Population Division: Washington, DC., Release Date: March 2018. www.census.gov/data/tables/2017/demo/popproj/2017-summary-tables.

Exam Question 3

I-Note: REVIEW the generational characteristics on the following page. INFORM students that there are other definitions and labels for generational groups, but these are the groups and labels used in the SRES® course. INVITE students to suggest famous people who are iconic of the generation.


15

SIX LIVING GENERATIONS The G.I. Generation, born 1901–1924, is quickly passing from the scene. The youngest

members of this generation are age 94 in 2018. About 890,000 in number, they

represent less than one percent of the U.S. population.

Silent Generation

1925–1945

7.66% of population

24.9 million

Age in 2018: 73–93

Cautious, conformist, risk-

averse, unimaginative,

industrious, prudent,

unquestioning of

authority

Baby Boomers

1946–1964

21.9% of population

71.3 million

Age in 2018: 54–72

Ambitious, optimistic,

individualistic, seeking

immediate gratification,

hardworking,

competitive, materialistic,

forever young

Generation X

1965–1976

15.2% of population

49.5 million

Age in 2018: 42–53

Skeptical, latchkey kids,

isolated, entrepreneurial,

independent, quality of

life/family before career,

self-reliant, pragmatic,

cynical, reluctant to

commit

Millennials/

Generation Y

1977–1994

24.2% of population

78.8 million

Age in 2018: 24–41

Empathetic with elders.

sheltered, tolerant,

sensitive to

multiculturalism, hopeful,

over-scheduled,

multitaskers, short

attention span

Generation Z

1995–2010

20.7% of population

67.6 million

Age in 2018: 8–23

Technology adept,

connected, introverted,

short attention span,

individualistic, impatient,

communication in social

media

Generation Alpha

Born 2011-

9.8% of population

32 million

Age in 2018: 7 and under

First generation born

entirely in the 21st

century. likely to be self-

reliant, independent,

trust as a core value, only

children of older parents

(next page) Slide 16: Silent Generation Slide 17: Boomers Slide 18: Gen X Slide 19: Millennials, Gen Y Slide 20: Gen Z, Alpha Generation


16

TEST YOUR GENERATION IQ

Because brand names become an integral part of everyday life, they also

become iconic of their eras. Can you match these brand names with the type of

product?

1. Woolworth ( ) A. Toothpaste 1. L

2. Braniff ( ) B. Wine 2. P

3. Drexel Lambert ( ) C. Magazine 3. S

4. Metrecal ( ) D. Fad gag gift 4. Y

5. Ipana ( ) E. Car company 5. A

6. Green Acres ( ) F. Laundry detergent 6. J

7. Life ( ) G. Lipstick 7. C

8. Pet Rock ( ) H. Rock group 8. D

9. Annie Greensprings ( ) I. Band leader 9. B

10. Burma Shave ( ) J. TV sitcom 10. V

11. Tangee ( ) K. News service 11. G

12. Twiggy ( ) L. Variety store 12. W

13. Wang ( ) M. Gadget inventor 13. U

14. Jordache ( ) N. Department store 14. Q

15. Hai Karate ( ) O. Savings reward program 15. X

16. DeLorean ( ) P. Airline 16. E

17. Bonwit Teller ( ) Q. Jeans 17. N

18. Wisk ( ) R. Restaurant chain 18. F

19. Popeil ( ) S. Junk bond broker 19. M

20. Jefferson Airplane ( ) T. Fashion designer 20. H

21. Herb Alpert ( ) U. Word processer 21. I

22. Movietone ( ) V. Shaving cream 22. K

23. KonTiki Ports ( ) W. Fashion model 23. R

24. Green Stamps ( ) X. Men’s cologne 24. O

25. Halston ( ) Y. Weight loss beverage 25. T

I-Note: Optional Fun Exercise: ALLOW students about 5 minutes to complete the quiz. CALL on students to provide answers. PROVIDE correct answers. NOTE that familiarity with these brand name icons illustrates generational differences, even in everyday life; people age 50+ will likely remember all of these items. RECOGNIZE students who answer the most questions correctly.


17

Looking Ahead

Those age 50+ represent a huge market potential because they possess most of

the nation’s personal wealth and home equity. Experienced practitioners attest

that 50+ clients will buy and sell two or three times as they transition through

life stages. As you gain a reputation as a trusted real estate advisor and

demonstrate your expertise and empathy in serving the 50+ market, you will tap

into a stream of future business. Let’s take a closer look at the characteristics of

the market and how best to serve different generational groups, as well as some

myths and realities about aging.


18

19



20


21

As we learned in the previous chapter, the generations of the 50+ market

represent a huge business opportunity. If the core skills you use every day—

prospecting, listing, counseling, providing services, showing property,

marketing, and other skills—apply with this market, what is different? Do you

have to be over 50 to work with this market? Regardless of your generational

“label,” conscientious and empathetic service will win you a reputation as a

trusted real estate advisor. Although generalizations cannot substitute for

understanding individual clients or customers, they can help you be aware of

the concerns, circumstances, and conditions of their lives and choices. Ask

yourself: am I aware of how the physical changes of aging affect mature adults

and the elderly? Do I know how to adapt services? Let’s begin by exploring some


MYTHS AND REALITIES OF AGING

Myth: Old People Are All the Same.

REALITY

The diversity of interests and experiences of youth and middle age is no less

present in mature years. In fact, older people are more diverse in important

ways than younger individuals. Just about everyone knows someone who is a

“youthful” 80 or an “old” 50. Health is a major factor in aging, and genetics plays

a role in both how quickly we age and what ailments we develop. But other

factors are also determinants, such as education, socioeconomic group, climate,

societal expectations, activity level, nutrition, and social connections. Negative

attitudes about aging and stressful life events, such as the death of a loved one

or financial hardships, can accelerate the aging process. Although we cannot

control the environment into which we are born or our experiences of

childhood, our actions and decisions as adults shape the course of life. And each

individual’s accumulation of life experiences is distinctly unique.

Accumulated experiences and life choices make older people a more diverse group than younger people.

I-Note: EXPLAIN that core real estate skills can be adapted to service the 50+ market. OBSERVE that the purpose of generalization is to help understand tendencies not to stereotype.

Slide 22: Old People Are the Same

I-Note: PRESENT and REFUTE myths about aging. ENRICH the presentation with examples from your own experience.

Exam Question 4


22

Myth: Families “Dump” Relatives into Nursing Homes.

REALITY

Nursing homes are a last resort for most families. Less than 5 percent of the

elder population resides in nursing homes. For the most part, families provide

in-home care with little or no outside support until the time of a crisis, such as

caregiver stress, intervening family responsibilities, illness, or increased care

needs. Services that allow elders to stay in their own homes or with family are

the first choice. Reflective of a long tradition of caregiving across generations,

African Americans are more likely to reside in extended households than their

white age-peers.

Myth: Old Equals Ill and Disabled.

REALITY

Research by the Federal Interagency Forum on Aging finds consistently that

more than half of respondents at all age levels rated their health as good to

excellent. “Individuals' beliefs about their own health status also have been

found to influence their expectations of retirement and the retirement process

itself.”2

Even though medicine has made significant advances during the lifetime of the

health-conscious baby boomers, they are aging into their senior years with

higher rates of disability and chronic disease—hypertension, high cholesterol,

obesity. On the plus side, boomers are less likely to smoke and experience lower

rates of emphysema and heart attack.3

Although overall disability rates among the 65+ population have declined in the

past 20 years, the baby boomers are entering senior and retirement years in

worse shape than previous generations. On the other hand, boomers—the

“forever young” generation—have higher expectations than earlier generations;

for their grandparents and parents, aches and pains were a natural part of

aging.

More than half of respondents at all age levels rated their health as good to excellent.

2“Growing Older in America” The Health and Retirement Study, National Institute on Aging, U.S. Department of Health and Human Services, www.nia.nih.gov. 3 King, Dana, MD et al., “The Status of Baby Boomers’ Health in the United States: The Healthiest Generation?” Journal of American Medical Association Internal Medicine, Vol 173 (No. 5), www.jamainternalmed.com.

Slide 23: Families Dump Elders in Nursing Homes

Slide 24: Old Means Ill and Disabled


23

FIGURE 2.1: SELF-REPORTED HEALTH STATUS OF GOOD TO EXCELLENT

Age 65–74 Age 75–84 Age 85 and older

Source: “Older Americans Update: Key Indicators of Well Being,” Federal Interagency Forum on Aging, www.agingstats.gov.

Myth: Old People Are Lonely and Gradually Withdraw.

REALITY Although the number of casual relationships may decline, mature and elder

adults have close friends and relationships to the same degree that younger

people do. Relationships with family and friends are an important part of

satisfaction with life. Moreover, maintaining ties with friends, family, and the

community is a major motivator for the desire to age in place. Only a small

percentage of elders are actually alienated from family, usually due to long-

standing estrangement. Most 50+ adults are members of a family network, see

their children weekly, or have frequent telephone contact. But, for reasons of

privacy and autonomy, most elders express a preference not to live with their

children.

Transportation is an important factor in maintaining social involvement, as well

as accessing essential services and even needed medical treatment. The

physical, mental, and financial factors that make it difficult for elders to drive

also make it difficult to use public transportation. The involvement of volunteer

drivers can help with both general and specialized transportation services.

80% 75% 68%

Slide 25: Old People Are Lonely and Generally Withdraw


24

Driver Safety

Even though some older adults drive safely into their eighth and ninth

decades, a study by the National Institutes of Health found that on average,

drivers age 70–74 continue driving for 11 more years.4

The ability to continue driving is a top concern for maintaining independence.

According to AARP research, older adults who are non-drivers are six times

more likely to miss out on something they would like to do because of lack of

transportation. AARP offers low-cost online and classroom driver safety

training and tips on talking to older drivers about their driving. The course

tunes up driving skills and updates knowledge of the rules of the road. Drivers

who complete the course may qualify for a discount on auto insurance. For

information about the course, including how to host an AARP Driver Training

Course, go to www.aarp.org/home-garden/transportation/driver_safety.

Myth: Older People Are Richer, Poorer Than Young People.

REALITY Social Security has greatly reduced the number of older people living in poverty.

In the 1960s, 45 percent of seniors lived in poverty and only 60 percent received

Social Security benefits; by the 1990s, the overall elder poverty level was

reduced to 10 percent, with 93 percent receiving Social Security benefits.

Among African-American and Hispanic elders, however, higher poverty rates

persist—26 and 21 percent, respectively. A number of mature adults are cash-

poor and house-rich. For many seniors, their homes account for most of their

net wealth.

FIGURE 2.2: INCOME DISTRIBUTION

4 Foley, Daniel J. et al., “Driving Life Expectancy of Persons Aged 70 Years and Older in the United States,” American Journal of Public Health, August 2002, Vol 92, No. 8. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1447231.

High income 36.4%

Middle Income31.1%

Low Income 22.5%

Slide 26: Driver Safety

I-Note: ADVISE students of any state driver’s license requirements, such as additional testing, for seniors. NOTE that some states require auto insurance discounts for seniors who take a special driving class. The class teaches how to compensate for hearing, vision, reflexes, and other skills that can be reduced with age.

Slide 27: Older People Are Richer, Poorer Than Young People

http://www.aarp.org/home-garden/transportation/driver_safety


25

FIGURE 2.3: SOURCES OF INCOME

Myth: Older People Are More Likely to Be Victims of a Crime.

REALITY According to the U.S. Department of Justice (DOJ), older people are less likely to

be victims of crime than young people and property crimes are by far the most

frequently experienced. However, personal safety and fear of crime are

important factors in choosing a location. The fact is that when older adults are

the targets of violent crimes, they are more likely to experience severe injury

and are also more likely to face offenders who are strangers.

Myth: Every Retiree Wants to Live in Florida.

REALITY

The geographic distribution of the older population follows the same pattern as

the general population. The most populous states—California, Florida, Texas,

New York, Pennsylvania, Ohio, Illinois, Michigan, and New Jersey—are also

home to the largest percentages of older people. Florida remains at the top of

the list of states with the largest population of age 65+ residents. Other warm-

weather states such as California, Texas, North Carolina, South Carolina and

Nevada have fast growing older populations.

Eight out of 10 Americans live in metropolitan areas, and so does the older

population. About one quarter live in the central city. Metro elders cite access

to cultural and educational events as important considerations. They also value

the transportation, health care, and shopping available in metro areas that

would be difficult to replace in small towns or rural settings. The tradeoff for

metro living, however, may be a higher cost of living.

Assets 6%

Pensions 16% Earnings 24%Social Security

49%

Slide 28: Older People Are More Likely to Be Victims of a Crime

Slide 29: Every Retiree Wants to Live in Florida


26

Myth: Older People Don’t Use Technology.

REALITY

People age 50+ are online and Internet-connected. According to a study by Pew

Research, up to 75–80 percent of adults between age 65 and 74 are online.

Among adults age 80+, Internet usage drops below half.

For “snowbirds” and those who are constantly on the go, email or social media

may be the most reliable way to keep in touch

Use the Internet5

Age 65–69 82%

Age 70–74 75%

Age 75–79 66%

Age 80+ 44%

“There are few other spaces—online or offline—where tweens, teens, sandwich generation members,

grandparents, friends, and neighbors regularly interact and communicate

across the same network.”6

According to a study by AARP, about 7 out of 10 of people between the age of

50 and 69 own a smart phone. Those over age 70, however, are more likely to

own a desktop computer than smartphone. Those who own a smartphone,

tablet, and desk/laptop tend to use the devices for different purposes;

“computers for practical tasks, tablets for entertainment, and smartphones for

social and on-the-go activities.”7

FIGURE 2.4: HOW ADULTS AGE 50+

USE COMPUTERS, SMARTPHONES, AND TABLETS (TOP 5 USES)8

Desk or Laptop Smartphone Tablet

Surf the Internet

Make a purchase

Get news and info

Banking and financial

Text and email

Text and email

Directions, traffic info

Download or buy apps

Surf the Internet

Get news and info

Surf the Internet

Get news and info


Text and email

Play games

Older adults do the same things online as younger people. They surf the net,

keep in touch by email and texting, comparison shop, get news and information,

use social networking sites, and get driving directions. Going online once or

several times a day is part of their daily routine.

5 Technology Use and Attitudes Among Mid-Life and Older Americans, AARP Research, December 2017, https://www.aarp.org/research/topics/technology. 6Mary Madden, “Older Adults and Social Media,” Pew Research Center, www.pewinternet.org/2010/08/27/older-adults-and-social-media. 7 Ibid. 8 Ibid.

Slide 30: Older People Don't Use Technology


27

Elder Care Robots

The convergence of artificial intelligence and robotic technologies are a

burgeoning area of research and development in elder care. Adoption hurdles

include high costs and safety and privacy issues as well as user-friendliness of

devices. As these hurdles are tackled, the generations for whom technology is

part of daily life will likely welcome these assistive technologies that can extend

years of independent living, lend care giver support, and provide social

interaction. Just type “elder care robotics” in your Internet browser for

numerous articles and news about product development

UNDERSTANDING HOW WE AGE

Knowing about the physical aspects of aging can help you better understand

and serve the 50+ market. The good news is that, in the absence of disease,

normal aging can be a rather benign process. Genetic and environmental as well

as lifestyle factors determine how we age.

There’s good news about aging. A long lifespan provides the benefit of greater

perspective on life, self-knowledge, and a new depth to our gratitude. We

become less concerned with what others think about us, except for physical

appearance. Many life decisions—marriage, child rearing, career, retirement—

are settled and are no longer worries. Some might say a pleasure of “settling

scores” comes from living well and “outliving those who were mean to us.”

Respect for one’s own experiences, feelings, and opinions contributes to

successful aging, as does respect for the body through daily exercise and a

healthy diet.

I-Note: PRESENT facts of physical aging (next page).

Slide 31: How Do We Age?

(next page) Exam Question 5


28


Hearing: Hearing impairment

usually starts with loss in the

higher register tones and works

its way down until it reaches the

tone range of speech.

Vision: As we age, being both

near-sighted and far-sighted is

increasingly common. Low

vision is more common than

complete blindness. Subtle

color differences become less

distinct. At night, glare from wet

streets and the headlights of

oncoming traffic can make

driving difficult.

Weight: Weight increases in

men until mid-50s and in women

until late 60s, then gradually

decreases for both genders.

Increased body fat and slow

metabolism cause medications

to stay in the body much longer.

Temperature: We become more

vulnerable to heat stroke,

hypothermia, and dehydration as

the ability to maintain normal

temperature and blood pressure

decreases.

Height: Posture, spinal

alignment and compression,

and falling arches all can cause

decreased height.

Health: By age 70, almost

everyone experiences one or

more of seven common chronic

health conditions: arthritis, high

blood pressure, heart disease,

diabetes, lung disease, stroke,

or cancer.

Cognitive Ability: The abilities to learn, adapt, adjust, and express creativity are quite durable throughout life but are

influenced by interests and motivations. The habit of lifelong learning maintains cognitive ability. Language and problem-solving

skills do not diminish, but intuitive emotional right-brain thought tends to take precedence over logical left-brain thought.

Although the ability to recall names and events may decline, long-term “crystallized” memory is quite durable. Mild cognitive

impairment (MCI), more prevalent than destructive dementias or Alzheimer’s disease, doesn’t interfere with activities of daily

living (ADLs) or social interaction. Depression can be mistaken for cognitive impairment.


29

Working with Matures Working with Boomers

Remember full-service gas stations; feel that

“service isn’t what it used to be.”

May appear indecisive, overly cautious.

Afraid of outliving their assets.

Decisions are driven by circumstance, not the

market.

May be concerned with image when downsizing.

Value personal referrals.

See technology as a handy tool for

communications, news, and personal business.

May have little to occupy their time and may fill it

with repeated phone calls to the real estate

professional.

Value convenience and customization.

Do not need emotional support or hand-holding.

Hate rules.

Generally not need-driven or in a hurry.

Value representation of interests, managing the

process, pricing properties right, and one-stop

shopping.

Expect a timely response, but not necessarily

instant turnaround.

Want and expect expert services and advice.

Do not want information they can find themselves.

Comfortable with technology—it’s a basic need.

The Real Estate Professional Should The Real Estate Professional Should

Help them feel empowered to make a good

decision.

Provide testimonials and résumé.

Strive for face-to-face communication, courtesy,

and formality; address them as Mr. and Mrs., do

not use first names.

Be on time for all appointments.

Shake hands (“my word is my bond”).

Ask a lot of questions to find out what they really

want and don’t patronize.

Offer options and explain all the details.

Schedule a specific time for follow-up; explain that

you will address their concerns during that

appointment.

Be aware of physical limitations.

Emphasize your network of experts.

Be able to back up knowledge with experience and

credentials.

Provide the highlights.

Marketing should be age-targeted, not age-

restricted (boomers hate rules).

Inspire loyalty by demonstrating what you are

doing for them.

Interact in person, by telephone, or email.

Appeal to the active lifestyle.

Exam Question 6 Exam Question 7


30

THE CLIENT ACROSS THE DESK

The core skills and processes that you use when working with any buyer or

seller are applicable when working with the 50+ market. So, what is different?

Life stage needs and wants

Viewpoints on real estate ownership change as adults move through the

years before and during retirement. Real estate professionals need to

understand how these life stages affect decisions to sell or buy real estate

as well as needs and wants. A counseling session might include discussion of

factors such as favorite leisure activities, preferences for community and

group activities, health, mobility, and continued career plans. But, it’s

important not to make assumptions. For example, not every retiree wants

to downsize; some may be planning ahead for visits from grandchildren,

room for hobbies, or a home-based business.

Health and activity stage

It may be more productive to profile prospects in terms of health and

activity stage than age and to consider how these influence needs and

wants.

Who has the aging issues?

Consider also who has the aging issues. Elder parents and adult children

may have conflicting concerns, expectations, and priorities. The real estate

professional must learn how to uncover root issues and sometimes help

clients balance priorities. For example, when parents move in with their

adult children, the aging issues are those of the elder parent, even though

both the parent and adult child qualify as 50+ market prospects.

A long time since the last transaction

Most 50+ adults are homeowners and have experienced selling and buying

real estate. However, it may have been a long time since the last real estate

transaction and many things may have changed in the interim. The

experience gap may make a client as apprehensive as a first-time buyer.

Lack of motivation or indecision may mask as worry over the process and

the ability to see it through successfully. On the other hand, some mature

adults work through a cycle of upsizing and downsizing, manage real estate

investments, or apply business experience to the transaction.

Emotional time

The sale of a home may be the result of a major life event, such as the loss

of a spouse or a disabling illness. Understanding the dynamics of this

situation is important to providing supportive client service. Because it may

be a very emotional time, the real estate transaction is imbued with

meanings and sensitivities that would not be factors for younger clients. For

example, posting a sign on the front lawn not only makes the sale of a long-

(previous page) Slide 32:–Slide 33: Working with Matures Slide34–Slide 35: Working with Boomers Slide 36: The Client Across the Desk

I-Note: RELATE aging, health, and activity levels to working with mature and boomer clients. ENRICH the discussion with examples from your own experience. INVITE students to share examples.

Exam Question 8

I-Note: RECOMMEND age-targeted magazines and websites. ASK students what they read to keep up-to-date on the 50+ market.


31

owned home a reality but may also signify letting go of cherished memories

and attachments.

Loss of the financial decision-maker

When one spouse passes away, it may mean the loss of the family financial

decision-maker. The surviving spouse may have an incomplete picture of the

family finances and little experience with evaluating and making financial

decisions.

Learn about Interests and Concerns

A good way to learn about 50+ market interests and issues is to subscribe to

senior magazines and read what they read.

AARP Magazine:

www.aarp.org/magazine

Grand Times Magazine:

www.grandtimes.com

Reminisce Magazine:

www.reminisce.com

Trailer Life:

www.trailerlife.com

Senior Citizen Journal:

www.seniorcitizenjournal.com

WORKING WITH GEN X AND GEN Y

Why do we need to consider working with Gen X and Gen Y when the focus is

on the 50+ real estate market? These generations are the children of silents and

boomers and may be involved in the decisions about where and how their

parents will live. On page 32, we will look at some traits of Gen X and Gen Y.

Exam Question 9

Slide 37: Working with Gen X Slide 38: Working with Gen Y

http://www.aarp.org/magazine

http://www.grandtimes.com/

http://www.reminisce.com/

http://www.trailerlife.com/

http://www.seniorcitizenjournal.co/#m


32

Working with Gen X Working with Gen Y

Want you to provide access and

get the paperwork done.

Do not need “hand-holding” or

emotional support.

Pragmatic, risk-takers, results-

oriented.

Sense of entitlement.

High-tech/low-touch.

Expect prompt response.

Skeptical.

Rely on themselves to find data.

Awareness level is very high.

Already know the good deals.


Pragmatic, but empathetic with

elders.

Tolerant of diversity.

Prefer directness over subtlety,

action over observation.

Crunched for time, always

multitasking.

Heavily influenced by media and

peers.

High-speed, instant access is

expected.

Technology is a way of life.

Influenced by the look of your

website, Facebook page, blog.

The Real Estate Professional Should


Help negotiate price and details.

Handle the paperwork.

Fill in information gaps.

Help interpret information.

Provide fast responses

(maximum 2 hours).

Deliver everything “yesterday.”

Realize there is only one chance

to get it right.

Do not try to “sell” them

anything.

Above all, keep cool.

Be accustomed to multitasking.

Communicate by texting, social

media.

Avoid pretensions.

Never overpromise.


33

EXERCISE: GENERATIONS It is important to take into consideration both the client and anyone who might

be involved in the real estate decision-making process, such as children and

relatives. Your team of experts (discussed later in this course) will probably

include individuals from across the generational spectrum, too.

What are the ages of the oldest and youngest persons in your family?

What are the ages of the oldest and youngest persons in your office?

Where do you fit in the range of ages and generations in your family and office?

How do the generational differences affect communications in your family

and office?

I-Note: ASK students to respond to the questions on their own or in groups, and then share their answers with the class. WRITE the ages, by decade, on a flip chart. COMMENT on the range of ages. INVITE students to share thoughts on how these ages reflect their current clients and customers. LEAD a discussion about generational differences in interpersonal communications. ASK younger students how they gain trust when working with older clients. ASK older students what behaviors instill trust in younger colleagues. ASK younger students what qualities they admire in matures and boomers. ASK older students what qualities they admire in Gen X and Gen Y. LIST answers on a flip chart page.


34

EXERCISE: INTERVIEW YOUR ELDERS On your own time, interview your parents or grandparents. Learn about their

ideas, outlook on life, retirement, and senior years. You may be surprised by

what you will learn.

I-Note: SUGGEST that students find a time to interview elder relatives, such as parents and grandparents, to find out about their outlook and ideas. The results may be surprising.


35



36


37

This chapter looks at the trends, forces, and attitudes that define the retirement

landscape of the 21st century. The real estate professional who knows how

these forces and attitudes influence client behavior and choices can gain a

competitive edge. The retirement generations, including baby boomers, tend to

seek out and trust the advice of experts, and you want to be the trusted real

estate advisor.

CHANGING CONCEPT OF RETIREMENT When President Franklin Roosevelt signed the Social Security Act in 1935,

legislators intended to provide a secure retirement for the few years between

the end of working life and death. At the time, average life expectancies in

America were 58 years for men and 62 years for women; actuaries assumed

that disease would claim the lives of many before they were eligible for

benefits. Life expectancy for Americans is now 80 years. Preventive medicine,

along with nutrition and exercise, emphasizes adding healthy years in middle

and later life, not just extending years of infirm old age. Retirement is now the

“second half of life” and a time for reinvention and redefinition.

For an increasing number of Americans, retirement is more a journey spanning

several years and phases than a destination reached at age 65. Three trends are

reshaping retirement for 21st century Americans.

Delayed retirement

Phased retirement

Unretirement

The face of American retirement in 1935, the year of Social

Security enactment.

I-Note: COMMENT on redefinition of retirement by baby boomers. NOTE the theme of reinvention and adaptation.

Slide 40: Changing Concept of Retirement

I-Note: DISCUSS how expectations and attitudes about retirement have changed.


38

Delayed Retirement9

32%: Percentage of the workforce age 60–65 in 2017 (22% in 1994)


36%: Projected number of people age 65–69 who will be active workforce

participants in 2024

4.5%: Projected annual growth rate (2014–2024) for workforce participants age

65–54 (6.4% for workers age 75 and older)

13 Million: Projected number of active workforce participants age 65 and older

in 2024

Although older workers comprise the smallest percentage of the workforce they

are the fastest growing group according to the Bureau of Labor Statistics. A

combination of factors keeps workers on the job past the traditional age-65

retirement milestone.

Social Security Rules

Social Security rules encourage workers to stay on the job until they are old

enough to receive full benefits. Those born between 1943 and 1954 reach

eligibility for full Social Security benefits at age 66. Those born in 1960 or

later must stay on the job until age 67 for full benefits. Working past

eligibility age—up to age 70—earns credits that boost social security

benefits. Furthermore, AARP research shows that about four in ten older

workers need to work to make ends meet. 10

Education and Health

“Better education and health have increased older adults’ employment

prospects, jobs have become less physically demanding, and Social Security

and pension rule changes have made work more financially rewarding at

older ages.…Working longer boosts lifetime earnings, increasing Social

Security credits and the amount of resources workers can use to save for

retirement. It also shrinks the retirement period, so retirement savings do

not have to last as long.”11

9 Older workers: Labor force trends and career options, U.S. Bureau of Labor Statistics, Mitra Toossi and Elka Torpey | May 2017, BLS, https://www.bls.gov/careeroutlook/ 2017/article/older-workers.htm. 10 Williams, Alicia R. and S. Kathi Brown, “2017 Retirement Confidence Survey: A Secondary Analysis of the Findings from Respondents Age 50+”, AARP Research, December 2017. https://doi.org/10.26419/res.00174.001. 11 Johnson, Richard and Karen E. Smith, “How Retirement Is Changing in America”, Urban Institute, February 2016, https://www.urban.org/features/how-retirement-changing-america.

Slide 41: Delayed Retirement

I-Note: COMPARE delayed, phased, and unretirement. ASK students if the statistics match their perceptions of current retirees.


39

Staying Active

Money is not the only motivator for staying on the job after reaching

retirement age. Most older workers say they continue working to stay active

and involved and because they enjoy their jobs.

Phased Retirement

Instead of making an abrupt exit from the workplace some workers retire in

steps from full- to -part-time employment to eventual full retirement. During a

few years, they transition gradually through a series of bridge jobs from full-

time to part-time employment to full retirement.

Because few workplaces have a formal phased retirement process, employers

tend to work out ad hoc arrangements with valued employees. A phased-in

retirement arrangement can fill in the potential gaps when the employer can’t

find a new hire with the right skill mix. The employer keeps the worker’s

experience, skills, and knowledge on the job and the retiring employee stays

active and continues to earn income.

Unretirement

About three in ten workers unretire within six years of retiring.12 Retirees return

to the workplace for the same reasons that others delay or transition to

retirement.

IMPACT OF ECONOMIC EVENTS Each of the adult generations in their mature or middle-age years have

experienced economic shocks and setbacks occurred during peak earning years

or nearing retirement. For example, between June 2007 and November 2008,

Americans lost a quarter of their collective net worth as plunging house prices

wiped out home equity.

How did the Great Recession impact retirees? Research by Transamerica found

that most retirees experienced a decline in the value of their investments and

home. About one in ten (13%) retired earlier than planned due to job loss or

dissatisfaction, organizational restructuring, or buyouts and retirement

incentives. Despite the slow recovery, about half have full recovered, but one in

five (20%) feel they have not yet recovered fully and never will.13

12 The University of Michigan Health and Retirement Study (HRS), a longitudinal study supported by the National Institute on Aging (NIA U01AG009740) and the Social Security Administration, January 2017, https://hrs.isr.umich.edu/about/data-book. 13 18th Annual Transamerica Retirement Survey of Workers, Transamerica Center for Retirement Studies® (TCRS), TCRS 1364 -0618, Transamerica Institute, June 2018, https://www.transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2018_sr_18th_annual_worker_compendium.pdf.

Slide 42: Phased Retirement

Slide 43: Unretirement

Slide 44: Impact of Economic Events

I-Note: DISCUSS the impact of economic events on retirement savings and plans. POLL the class on which of the events they have experienced.

Exam Question 10


40

Delaying or phasing in retirement or returning to the workplace may be the

result of efforts to recover financially, pay down debts, and restore the nest egg

lost during the Great Recession.

FIGURE 3.1: GENERATIONAL AGES DURING EVENTFUL ECONOMIC EVENTS

Generation age range Silents Baby

Boomers Gen X Gen Y Gen Z

1973:Oil embargo,

energy crisis 48–28 27–9 8– — —

1979: 2nd energy crisis,

S/L failures 54–34 33–15 14–3 2– —

1987: Black Monday

stock market crash 62–42 41–23 22–11 10– —

2000–2001:

Dot.com bubble, 9/11 75–55 54–36 35–25 23–6 5–

2007–2010: Great

Recession Subprime

mortgage crisis, housing

bubble, foreclosures

82–62 61–43 42–31 30–13 12–

HOUSEHOLDS AND HOMEOWNERSHIP 75.4%: Rate of homeownership age 55–65, 78.5% age 70+14

64.7%: Overall homeownership for Americans all ages15

Three out of five older adults age 55+ and close to eight in ten age 70 own their

own homes. In fact, the percentage of older adults who own their own homes

surpasses the overall rate of homeownership. The configuration of households

of older adults varies from solo agers to three or four generations living under

the same roof. Relationships, ages, and care needs impact housing choices as do

life changes. The loss of a spouse, an adult child boomeranging back to parent’s

home, an elder relative’s deteriorating health impact retirees’ plans to sell or

stay put, downsize, or upsize.

14 Release Number: CB18- 57, April 26, 2018 —U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey, April 26, 2018, Quarterly Residential Vacancies and Homeownership, First Quarter, https://www.census.gov/housing/hvs/files/currenthvspress.pdf 15 Ibid.

Slide 45: Households and Homeownership

I-Note: PRESENT statistics and DISCUSS how household composition affects housing choices and decisions to buy or sell.


41

Married Couples

64% percentage of Americans age 55+ married, with spouse present16

Most older adults age 55–74 (64%) are married and live with their spouse. At

age 75, the percentage of married couples living together drops to about half

(52%) and by age 85 more than half (52%) of older adults are widowed.17 Loss of

a spouse is often the life event that brings about the sale of the family home

and purchase a smaller home, move to senior housing or move in with children

or other relatives.

Adult Children Living with Parents

24 million number of adult children (age 18-34) living in parents’ home, 8.3

million are age 25–34.18

“In 1975. 57 percent of young adults age 18–34 lived with a spouse and 26

percent lived with their parents. By 2016, the number of young adults living

with a spouse dropped by more than half (26 percent) and the percent living

with parents increased to 31 percent. A new pattern of “emerging adulthood” is

developing as young adults delay living independently, marrying, and starting

families.” 19

About one in four (6.3 million) adults children living with their parents are

neither employed nor enrolled in school. However, about 5 percent of the idle

group are disabled.

With their adult children still living in their home, parents may need to rethink

retirement plans, such as moving to a warmer climate, a senior oriented

community, or a smaller home with less maintenance responsibility. Paying off

student loan debt may impede saving for retirement and necessitate a return to

the workplace. On the other hand, adult children at home can provide are and

emotional support for aging parents and may contribute financially to the

upkeep and running of the home.

Student Loan Debt

Student loan debt is not an issue only for new graduates. Many retirees living on

fixed incomes are struggling to pay off student loan debt. The Government

Accountability Office estimates that 867,000 households are headed by

someone 65 or older who carries student loan debt. In addition, upwards of 6

16 Table A1. Marital Status of People 15 Years and Over, by Age, Sex, and Personal Earnings: 2017, Current Population Survey, 2017 Annual Social and Economic Supplement, Revised: May 4, 2018, U.S. Census, https://www.census.gov/data/tables/2017/demo/families/cps-2017.html. 17 Ibid. 18 Vespa, Jonathan, The Changing Economics and Demographics of Young Adulthood: 1975–2016, Current Population Reports, P20-579, Issued April 2017, https://www.census.gov/content/dam/Census/library/publications/2017/demo/p20-579.pdf. 19 Ibid.

Slide 46: Married Couples

Slide 47: Adult Children


42

million borrowers age 50 to 64 hold federal student debt. NAR’s 2018 Home

Buyer and Seller Generational Trends research study found a median student

loan debt load of $30,000 for a significant number of borrowers age 53–63—

crucial years for accumulating retirement savings.

FIGURE 3.2: % OF BUYERS WITH STUDENT LOAN DEBT

% Buyers who have student loan debt Amount (median)

Age 72–92 2% $15,000

Age 64–71 4% $25,000

Age 53–63 11% $30,000

Sandwich Generation

With children remaining financially dependent into adulthood and parents living

longer, healthier lives, a significant number of middle-aged and older adults are

caring for both elder parents and children. Baby boomers, however, are

gradually aging out of the sandwich generation as Gen Xers move into middle

age. Pew research reports that 42 percent of Gen Xers have parent age 65 or

older and a dependent child, compared with about a third of boomers.20

Although their elderly parents are healthier and wealthier than previous

generations, they are still likely to rely on their children for assistance and

emotional support. Dependent adult children tend to rely on their parents for

financial support. Sandwich generation households may carry a considerable

financial burden when the adults in the “middle” must support three

generations at one time: their parents, their immediate family (self and spouse)

and children.

Multigenerational Households

NAR’s survey of older home buyers found that one in five buyers age 53 to 62

purchased a multi-generational home—three of more generations living

together. Buyers 72 to 92 years was the second largest share at 17 percent.

Leading reasons for the home purchase were to take care of aging parents,

saving money, and because children over the age of 18 are moving back.21

The U.S. Census Bureau estimates the number of multigenerational households

at 4.6 million, about 4 percent of U.S. households, and the number of Americans

residing in such homes at 28.4 million.22

20 Parker, Kim and Eileen Patten, “The Sandwich Generation, Rising Financial Burdens for Middle-Aged Americans,” Pew Research Center, Social and Demographic Trends, 2013, http://www.pewsocialtrends.org/2013/01/30/the-sandwich-generation. 21 2018 Home Buyer and Seller Generational Trends, National Association of REALTORS® Research, https://www.nar.realtor/sites/default/files/documents/2018-home-buyers-and-sellers-generational-trends-03-14-2018.pdf. 22 U.S. Census, 2016 American Community Survey, Table B11017, https://factfinder.census.gov/bkmk/table/1.0/en/ACS/16_1YR/B11017

Slide 48: Sandwich Generation

Exam Question 11

Slide 49: Multigenerational Households


43

Grand-Families

4.5 million: The number of Americans children being raised by a grandparent23

U.S. Census data indicate that approximately 2.5 million U.S. grandparents are

raising 4.5 million grandchildren children. These grandparents have stepped into

a parenting role because their adult children are unable to care for their

children or are absent. Each situation is unique, but almost all involve painful

family decisions and circumstances, such as divorce, unemployment,

abandonment, incarceration, substance abuse, neglect, or death. Late-life

parenting can be physically, emotionally, and financially stressful. And housing

can be a problem if the grandparent lives in an age-restricted community that

does not allow extended stays for youngsters.

Solo Agers

30.5%: Percentage of Americans age 55–85+ widowed, divorced, separated24

7.9%: Percentage of Americans age 55–85+ never married25

More than one-third of older adults are on their own, either because of

remaining single or because of divorce, separation, or widowhood. As they age,

new trends can emerge in mutual help groups and living arrangements. For

example, couples living apart together in later life (LAT or LLAT) have a close

stable relationship but maintain separate households. Having past the years of

family raising, career, and perhaps caring for an ailing spouse, LLAT couple have

the benefits of cohabiting but remain independent.

It’s important for solo agers to strategize where they age and how they will

accomplish the daily tasks of living. Steps the solo agers can take to prepare

include getting paperwork in order—advance directives, powers of attorney,

wills—and tapping into a social network of people in similar circumstances.

23 U.S. Census, American Fact Finder, American Community Survey, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_16_1YR_S0201&prodType=table. 24 Table A1. Marital Status of People 15 Years and Over, by Age, Sex, and Personal Earnings: 2017, Current Population Survey, 2017 Annual Social and Economic Supplement, Revised: May 4, 2018, U.S. Census, https://www.census.gov/data/tables/2017/demo/families/cps-2017.html. 25 Ibid.

Slide 50: Grandfamilies

Slide 51: Single Retirees

(next page) Slide 52: LBTG Cultural Competence I-Note: DISCUSS LBTG cultural awareness based on the following article.


44

INCREASING LGBT CULTURAL COMPETENCE Kelly Kent, Director, National Housing Initiative, SAGE and Jeff Berger,

REALTOR®, Founder of National Association of Gay & Lesbian Real Estate

Professionals (NAGLREP)

Demographic Background

Older adults who are Lesbian, Gay, Bisexual, and/or Transgender (LGBT) are a large and growing segment of the older adult population. Lacking Census data, it is difficult to know the number of LGBT older adults living in the United States. However, recent research estimates that 2.4 percent of Americans self-identify as LGBT, including 2.7 million aged 50 and older, of which 1.1 million are 65 and older.26

Discrimination and Fear of Discrimination in Housing

A survey of 1,700 LGBT home buyers and sellers found that most respondents

believe homeownership is a good investment but have strong concerns when it

comes to housing discrimination.27 The study did not focus on actual

discrimination that had taken place but rather fears of respondents of potential

discrimination. In actual experience, about half (48%) of older same-sex couples.

A study by the Equal Rights Center found that one in four transgender older

adults encountered discrimination when applying for senior housing.28

Furthermore, seven in ten transgender respondents fear that as they grow older

they will need to hide their identity from housing and service providers. 29

There are LGBT older adults within all other minority communities and many

LGBT older adults grapple with discrimination based on their LGBT identity as

well as race or religion. Discrimination may take the form of a clear refusal to

offer housing to an LGBT person, or may take subtler forms such as refusing to

show a one-bedroom unit to two people of the same sex in a rental

environment, showing LGBT applicants less desirable units, or charging

additional fees during the mortgage lending process, requiring additional

paperwork and background checks, or refusing to use a transgender person’s

chosen name and correct pronouns. An AARP study found similar fears of

discrimination including discrimination by real estate professionals, home

26 Fredriksen-Goldsen, Karen et al., “Successful Aging Among LGBT Older Adults: Physical and Mental Health-Related Quality of Life by Age Group,” Gerontologist, 2015 Feb; 55(1): 154–168. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4542897 27 2015 LGBT Home Buyer and Seller Survey, Better Homes and Gardens and The National Association of Gay and Lesbian Real Estate Professionals (NAGLREP), https://naglrep.com/wp-content/uploads/2017/06/naglrep-lgbt-survey-2015.pdf. 28 The Opening Doors Toolkit: Fair Housing Self-Advocacy for Older LGBT Adults, The Equal Rights Center, 2015, https://equalrightscenter.org/wp-content/uploads/lgbt-senior-toolkit.pdf. 29 Maintaining Dignity: Understanding and Responding to the Challenges Facing Older LGBT Americans, An AARP Survey of LGBT Adults Age 45-Plus, AARP Research, 2018, https://www.aarp.org/content/dam/aarp/research/surveys_statistics/life-leisure/2018/maintaining-dignity-lgbt.doi.10.26419%252Fres.00217.001.pdf.

A Few Facts about

Same-Sex Couples

Number of same-

sex couples:

887,458

Homeowners:

65%

Both partners

employed:

60%

Median household

income:

$90,493

Source: U.S. Census Bureau, Table 1. Household Characteristics of Opposite-Sex and Same-Sex Couple Households: 2016 American Community Survey, https://www.census.gov/programs-surveys/acs


45

sellers, property owners, mortgage lenders, property management companies,

and neighbors. Furthermore, LGBT older adults are concerned about future

social supports, access to culturally competent medical care, and discrimination

in long term care settings. Concern rates were highest among transgender

respondents.30

Antidiscrimination Laws

Although there are still no federal housing protections based on sexual identity

and gender identity there are multiple anti-discrimination laws at the local and

state level. There are, however, certain protections through any federally

funded housing programs, including FHA backed mortgages. The Equal Access

Rule, instituted in 2012, Automatic Protections for Marital Status, Gender

Identity, Gender Expression, and Sexual Orientation for Federally Funded

projects. It’s important to learn the specific housing protections offered in your

local community or state. For a listing by geographic location go to

http://www.lgbtmap.org/equality-maps/non_discrimination_laws.

LGBT Cultural Awareness

The terms sexual preference or alternative lifestyle are often used to describe

the LGBT community. These terms should be avoided, as they both imply that

sexual orientation or gender identity are a choice or can be changed or cured.

Likewise, the term homosexual should be avoided, especially with older adults.

Over the years the term has taken a negative connotation because until 1973

homosexuality was considered a diagnosable psychological disorder, and the

word still carries stigma and fear. Younger LGBT people are reclaiming the word

queer and using it in a positive way. For many older adults this term still carries

a very negative connotation, and it is recommended that you do not use the

word queer unless the older adult has made it clear that it is a term they use.

LGBT Clients and Customers

LGBT respondents looking to purchase a home in the next three years are most

concerned about selecting a real estate professional who has an excellent

reputation (93%) and is LGBT-friendly (86%). Only 13 percent thinks it is very

important that their sales associate identify as LGBT. Also of note, 78 percent of

respondents said that being LGBT friendly is more important than a real estate

professional’s years of experience.

30 Ibid


46

ADVOCATES FOR LGBT OLDER ADULTS SUGGEST THE FOLLOWING:

Ensure that your non-discrimination policy includes sexual orientation,

gender identity, and gender expression. Post a version of the policy, written

in plain language, in your building entryways.

Train your staff on LGBT cultural competency including appropriate

terminology, the history of the LGBT experience, and the unique culture of

LGBT older adults. You can learn more about training at www.sageusa.care

Demonstrate dignity and respect if there is question by asking what gender

pronouns the individual prefers, which demonstrates your cultural

competency and sensitivity.

Advertise your services in local LGBT media and make it clear on your

website and promotional materials that you are open and affirming, or have

experience working with LGBT clients.

Join NAGLREP and add your profile to the directory of LGBT and allied real

estate professionals. NAGLREP.com receives 75,000 unique visits per month

from LGBT home buyers, sellers and referring agents.

Provide a link to the AARP’s downloadable Prepare to Care, A Planning

Guide for Caregivers in the LGBT Community. Go to www.aarp.org/pride.

SAGE is the nation’s oldest and largest organization advocating for LGBT older

adults. For more information on LGBT aging issues, go to SAGE National

Resource Center on LGBT Aging at https://www.lgbtagingcenter.org.

HOUSING CHOICES How do 21st century retirement trends and experiences impact housing choices?

How do trends affect the decision to buy or sell, age in place or move?

Staying Close to Home

Silents and baby boomers are staying close to home. About eight in ten plan to

stay in the same state or region. When continued work is an economic

necessity, proximity to employers who hire older workers becomes a compelling

factor for choosing a retirement location.

Baby boomers intend to age in place, but their housing needs will change as

they grow older. Along with retirement, top reasons for selling are moving to be

closer to family and friends and downsizing.

Slide 53: Housing Choices

I-Note: PRESENT statistics on home buyer and seller generational trends. ASK if the statistics are reflective of their market areas. ENCOUAGE students to download the full report from NAR’s research web page.


47

Active Adult Planned Communities

Age-restricted and active adult communities were designed for the mature (GI

and Silent) generations. For them, the ideal retirement was a time of withdrawal

from work and responsibility for a life of endless leisure in a warm climate. Most

of the retirement institutions in place today—health care delivery, government

programs, and expectations such as age milestones—were designed for this

concept of retirement. About 20 percent of baby boomers are interested in

senior communities according to research by Del Webb. Considering the size of

the generation, even the small percentage represents a huge market.31

Developers are responding to the changing demographics by building closer to

urban centers with access to job markets for retirees who continue to work, as

well as designing niche communities based on retirees’ special interests.

Examples of niche communities include Spruce Creek Airpark near Daytona

Beach or the Florida Latitude Margaritaville communities based on the laid-back

style and music of Jimmy Buffet. University based communities, such as Kendal

at Hanover at Dartmouth College, Holy Cross Village at Notre Dame, or Oak

Hammock at the University of Florida offer access to university-level life-long

learning and cultural events.

31 Hurley, Amanda Kolson, "The Subtle Shifts in Retirement Community Designs, Citylab.com, 2015, https://www.citylab.com/equity/2015/09/the-subtle-shifts-in-retirement-community-design/403723.

(next page) Slide 54-Slide 56: Home Buyer and Seller Generational Trends



48

Home Buyers and Sellers Generational Trends

Reasons for selling (top 3)

Age 72–92 Age 64–71 Age 53–63 Moving due to retirement Job relocation

Be closer to friends, family Home too large, upkeep difficult

Reasons for buying (top 3)

Age 72–92 Age 64–71 Age 53–63 Be closer to friends, family Own a home Moving due to retirement Job relocation

Want a smaller home

Size of home purchased (square feet)

Age 72–92 1800 3 bedrooms

2 full bathrooms Age 64–71 1900

Age 53–63 1870

Median

Home sold and purchased, distance moved

Sold Purchased Distance

Age 72–92 $247,000 $245,000 22 miles

Age 64–71 $274,000 $250.000 39 miles

Age 53–63 $264,000 $273,000 20 miles

Median

Equity and tenure in home sold

Equity Tenure 21+ years

tenure

Age 72–92 $60,000 (40%) 16 years 37%

Age 64–71 $86,000 (46%) 15 years 33 %

Age 53–63 $59,900 (30%) 13 years 23 %

Median

Purchased Senior-Related Housing

Purchased a Single-Family Home

NAR 2018 Home Buyers and Sellers Generational Trends, Research and Statistics, www.nar.realtor/ research-and-statistics/research-reports/home-buyer-and-seller-generational-trends

80% 81%

72%

Age 53-63 Age 64-71 Age 72-92

10% 9%11%

13%

45%48%

50% 51%

27% 26%

20%22%

6% 5%3% 2%

Age 72-92 Age 64-72 Age 53-63 All age 50+

Location of Home Purchased

Urb

an

Su

bu

rban

Sm

all T

ow

n

Res

ort

8%

17%

28%

Age 53-63 Age 64-71 Age 72-92


49

HOME—ASSET OR ANCHOR? The big question for current and future retirees is how much equity is in their

homes and to what extent will they be willing to use it to fund retirement

choices. The mature generations see their homes as the last place they would

ever give up or risk. The baby boomers, on the other hand, are more

accustomed to seeing real estate, including their homes, as part of a portfolio of

financial assets. They may be less hesitant than their parents’ generation to take

cash out of home equity through a line of credit or loan. A big question is

whether they will see their homes as an asset that can be tapped to support

their retirement years or echo the attitudes of the preceding generations who

would never put their homes at risk.

House Locked?

Following the economic recession, real estate values declined across the

country, with home values sinking below mortgage balances in some areas. But

for debt-free older homeowners, an upside-down mortgage may be less of an

issue than loss of value.

Although market conditions have, for the most part, recovered to near pre-

recession values, there are other considerations that may work to inhibit a

senior seller from downsizing or moving on. As a real estate professional, you

should work with these sellers to determine how comparable homes affect their

property’s value and acknowledge any inhibiting factors that the seller has

identified. After listening to the seller’s concerns, explain available options so

that they do not feel “house locked” in their current property. If sellers can

identify solutions based on your recommendations, it is likely that they will work

with you to achieve their goals

Slide 57: Home—Asset or Anchor


50


51



52


53

What is your concept of aging in place? Most envision continuing to live safely,

independently, and comfortably in their own home and the familiar

surroundings of a supportive community.

Life-enriching aging in place is not a passive activity. It doesn’t result from just

staying put and adding up the years; according to AARP research, 8 out of 10

adults will experience future special housing needs. Successful aging in place is a

process of taking stock of current and future needs, thinking through the

options, evaluating the house and the community, and developing strategies.

The process starts with asking the question, what will you need to age

comfortably and safely in this house and in this community?

PLAN FOR AGING IN PLACE For many, where they live—the community or home—at retirement is where

they want to live out their lives. Does this mean that mature adults do not move

to new homes or communities? Some relocate before reaching an age or life-

stage milestone. Second-home owners may move to their vacation homes for

aging in place. Another trend is relocating to a future retirement residence and

commuting from there before full retirement. As we will see in this chapter, the

choice of where and how to age in place often depends on health and support

needs. We’ll look at how homes can be adapted for aging in place and discuss

the opportunities for real estate professionals in helping sellers, buyers, and

their families find solutions for aging in place. Let’s begin by looking at two

aspects of aging in place:

Aging in the community:

Remaining in a familiar community but in a more suitable residence—

condo, apartment, or different house—with friends, family, activities, and

support services nearby. Or relocating to a community that provides a safe

environment and needed services and support or moving closer to family.

Aging in the home:

Remaining in the current residence, accessing support services, and

modifying the home as needs change.

A plan for aging in place is not a plan for advanced old age or illness. It is a

portfolio of strategies for maintaining control of the environment and quality of

life. When family members participate in planning, they have an opportunity to

voice concerns, work through practical and emotional issues, and visualize their

future roles. Most important, they learn their elders’ wishes and preferences.

I-Note: INTRODUCE the elements and planning process of successful aging in place.

Slide 59: What is Aging in Place?

Slide 60–Slide 61: Plan for Aging in Place

Exam Question 13

I-Note: OBSERVE that aging in place includes remaining in the community as well as in the home. PRESENT the concept of a plan for aging in place as a portfolio of strategies.


54

PLANNING CONTINUUM FOR AGING IN PLACE

It may help to think of an aging-in-place plan in terms of a continuum based on

health and support needs. Where an individual fits on the continuum indicates

present and future actions, priorities, and how quickly decisions must be

implemented. Note that this continuum is tied to health, mobility, care, and

service needs, not specific ages. At every stage of the continuum, real estate

needs for aging in place change and create opportunities for real estate

professionals to work with buyers and sellers.

No Urgent Needs

Progressive or Chronic Health Conditions

Urgent Needs, Sudden Changes, Advanced

Conditions

There is time to think ahead, research options, develop strategies, and discuss choices with family members. Simple, universal design home modifications can enhance independent living and prevent debilitating accidents and falls. This stage may involve a planned move to a second home or active adult community. Community service needs: participation in events, volunteer opportunities, focus on maintaining involvement and an active lifestyle.

Changes in life and health circumstances necessitate home modifications or a move to a more suitable living arrangement. Although not urgent, gradual progression of conditions makes adaptations inevitable. There is time to research care options or move to a more suitable home or closer to family. Community service needs: support independent living, facilitate access to health care providers, and provide emergency response.

A sudden change in health or life circumstances requires immediate adjustments to the home and possibly the living situation. Progressive conditions reach advanced stages and require full-time care. Home modifications are needed to enable care and maintain safety. A full-time care provider or a move to a medically oriented care facility may be necessary. Community service needs: long-term medical care and care-provider support.

Slide 62–Slide 65: Planning Continuum for Aging in Place


55

AGING IN PLACE: THE COMMUNITY

What makes a community a good place to age in place? AARP offers the

following list of community attributes that support independent living for older

adults:32

Well-run community centers, recreation centers, parks, and other places

where people can socialize and participate in public meetings and events

Volunteer opportunities

Dependable public transportation; safe and convenient transportation

options available, such as rides from friends or family

Safe sidewalks that connect the places that people want to walk to

Roads designed for safe driving with unambiguous signage and clearly

marked traffic stops and pedestrian crosswalks

Range of housing options, including affordable housing, elsewhere in the

community if a resident wants to leave the current home

Naturally Occurring Retirement Communities

Not all 50+ communities are planned developments; some happen naturally as long-time residents of a neighborhood age in place. About one in four mature adults live in a naturally occurring retirement community (NORC). Except for the age of the residents, there are seldom any other defining characteristics. NORCs occur in small towns, suburbs, and rural settings. They can be a community, an apartment building, or a section of a neighborhood and are increasingly common in rural areas where young people migrate to cities for job opportunities.

NORCs develop when long-time

residents of a neighborhood

age together in the same place.

32 Adapted from “Beyond 50.05: A Report to the Nation on Livable Communities,” www.aarp.org.

Slide 66: What Makes a Community Good to Age in Place?

I-Note: DESCRIBE attributes of supportive communities.

I-Note: ASK if there are any NORCs in the market area?

I-Note: REFER to the article on the following pages for examples of community-based aging-in-place support.


56

RETIRING TO YOUR HOME

Reprinted with permission of National Association of REALTORS®, excerpt from On Common Ground,

https://www.nar.realtor/on-common-ground.

https://www.nar.realtor/on-common-ground


57


58


59


60

Aging in the Community Checklist

When working with clients and customers, use this checklist to evaluate a community or neighborhood

for aging in place. You should stress that all listed items should be considered and that you are not

claiming expertise in all items (e.g., medical).

Medical Health care facilities, doctors, hospitals, clinics,

specialists Prescription drug plans Emergency services

Market Range of housing options and prices Resale value and appreciation potential

Transportation Transportation—public and private volunteer Roads Traffic volume Golf cart sales and service Airport proximity and airline service Parking

Community and Activities Public safety Planned communities Employment opportunities Volunteer opportunities Popular activities and hobbies Cultural and educational institutions Opportunities for civic engagement Houses of worship Camaraderie with privacy Quality of life Attitude of locals toward “snowbirds”

Fitness Exercise programs Pool, golf, spas, wellness facilities Walking trails and paths

Cost of Living Overall costs Utility costs—electricity, gas, water Taxes—property, income, sales

Climate Changes of season and climate variations Likelihood of destructive storms and natural

disasters Environmental quality Natural features: parks, coastlines, mountains,

scenery

Services Shopping (quality, selection, convenience) High-speed Internet access Restaurants (range of prices and types)

Senior and Aging Services Senior concierge services Nutrition (meals on wheels) Senior-specific places, communities, facilities Aging and human services Independent living support Congregate, assisted, skilled care, nursing

home facilities

Properties Maintenance-free (no lawn care, snow

removal) Storage space Alarms in bedroom/bathroom Garage or parking Square footage Barrier free—no thresholds, wide doors and

hallways No fall hazards Age-restricted, age-targeted, NORCs


61

? Discussion Question

How does your community rate for support of aging in place?

Check out the livability score of your community at AARP’s Livability Index at

https://livabilityindex.aarp.org.

AGING IN PLACE—THE HOME

What makes a home suitable for aging in place? A survey of generational

preferences by the National Association of Homebuilders found that baby

boomers and silents favor the following home features.33

Suburban or near suburban location

Single-family detached home

1 level, 2-car garage

3 bedrooms, 2–3 bathrooms, full bath on the main level

Open kitchen and family room

Separate living room

Median size of 1,900 square feet or less

Expected price of next home of $220,000

33 Housing Preferences Across Generations, NAHB Economics and Housing Policy Group, Special Studies March 1, 2016, https://wdn.ipublishcentral.com/ national_association_home_builders/viewinsidehtml/746901096336991.

I-Note: COMMENT on the checklist on the preceding page. OBSERVE that some specialists use a checklist to highlight selling points. ASK students how their community supports aging in place.

Slide 67–Slide 68: Age in Place—The Home

I-Note: BEGIN the presentation of aging in place in the home. ASK students if the research findings match 50+ market preferences in their areas.

https://livabilityindex.aarp.org/


62

UNIVERSAL DESIGN STANDARDS Universal design is the creation of products and environments so that they are

usable by all people to the greatest extent possible. Universal design features

can make it possible for an aging homeowner to remain comfortably and safely

in the home on an independent basis and for a longer time. Real estate

professionals should be aware of this growing trend in home construction and

highlight these design features when helping 50+ buyers search for a home.

Buyers may not be aware of the benefits of universal design in home design or

fully appreciate how these features enhance present comfort and support

future aging in place.

7 Universal Design Principles34

1. EQUITABLE USE

Same means of use, or equivalent, designed for people with diverse

abilities, appealing to all users, not segregating or stigmatizing any users

Privacy, safety, and security equally available for all

2. FLEXIBLE USE

Accommodates a wide range of individual preferences and abilities

including both left- and right-handed users

Adapts to user’ space and aids the precision

3. SIMPLE AND INTUITIVE

Use of the item easily understood independent of experience, language,

knowledge, or ability to focus

Consistent with user expectations and intuition

Information arrangement reflects importance

4. PERCEPTIBLE INFORMATION

Design that communicates what the user needs to know independent of

the surrounding conditions or the user’s senses, such as hearing

Provides the information several ways, such as verbally, visually, by

touch for the blind, and in large print for those with impaired vision

34 Center for Universal Design, College of Design, North Carolina State University, https://design.ncsu.edu.

Slide 69: 7 Universal Design Standards

I-Note: ILLUSTRATE universal design standards with samples such as a Good Grip kitchen tool or similar devices, photographs from assistive device catalogs, or universal design standards websites.

Exam Question 14


63

5. TOLERANCE FOR ERROR

Minimizes hazards and provides warnings

Minimizes consequences of accidents and mistakes and provides fail-

safe features and a means to correct mistakes, such as a cancel button

6. LOW PHYSICAL EFFORT

Reduces repetition and sustained effort

Requires only reasonable operating force

Allows user to maintain a neutral, normal body position, with little or no

bending

7. SIZE AND SPACE FOR APPROACH AND USE REGARDLESS OF BODY SIZE, POSTURE, OR MOBILITY

Clear line of sight for standing or seated user

Components reachable from a seated or standing position

Accommodates variations in hand and grip size

Allows user to approach, reach, or manipulate in the appropriate space,

such as doors and hallways wide enough for wheelchairs and reduced-

height or extended counters to accommodate people of small stature or

in wheelchairs.

Optional Exercise: DIVIDE the class into groups and ASSIGN each group one of

the highlighted areas: kitchen, bath, entry and stairs, home design, home care,

faucets/switches/controls. INSTRUCT the students to augment the list with

additional items and IDENTIFY low-cost items. A discussion question box with

space for notes appears on page 67. ALLOW 10 minutes for the groups to

complete the assignment. ASK a spokesperson for each group to share the

group’s list of additional items.


(slides appear on following pages) Slide70–Slide 71: Adapting a Bathroom Slide 72–Slide 73: Faucets, Switches, Controls Slide 74–Slide 75: Entry and Stairs Slide 76–Slide 5: Adapting the Kitchen Slide 79–Slide 80: Home Design and Layout Slide 81: Home Care


64

ADAPTING A HOME FOR AGING IN PLACE

Bathroom

Tub and shower controls offset

Light in shower stall

Shower stall with low or no threshold, trench drain

Fold-down shower seat

Hand-held showerhead with 6' hose

Lift or transfer seat for bathtub

Lower bathtub for easier access

Grab bars at back and sides of shower, tub, and

toilet, or wall-reinforcement for later installation

Adapter to raise toilet seat 2½"–3" higher than

standard

Turnaround and transfer space for

walker or wheelchair (36" x 36")

Knee space under sink and vanity

Counters at sit-down height

Emergency alert or call button

Faucets, Switches, Controls

Temperature-controlled or anti-scald valves for

faucets

Lever faucet handles

Easy-to-read, pushbutton controls

Lever door handles

Loop drawer handles

Easy-to-read, programmable thermostat

Rocker light switches at each room entry

Lighted switches in bedrooms, bathrooms, and

hallways

Light switches at 42" from floor

Electrical outlets 15"–18" from floor

Front controls on cooktop


65

Entry and Stairs

At least one entry without stairs

36"-wide doorway with offset hinges

Side window at entrance or lowered peephole

Handrails on both sides of stairs

Outside stair height below 4"

Contrasting strip on stair edge

Ramp slope of no more than 2" per 12" in length, 2" curbs, 5'

landing at entrance

Low (maximum ½" beveled) or no threshold

No mats or throw rugs

Exterior sensor light focused on door lock

Surface inside doorway for placing packages

Audible doorbell

Flashing porch light

Kitchen

Cabinets with pull-out shelves and turntables

Wall cabinets set below (about 3") standard height

Glass cabinet doors or open shelving

Easy-to-grasp cabinet knobs, pulls, or loop handles

Task lighting under cabinets

Electric cooktop with front controls and hot-surface

indicator

Microwave at counter height

Wall oven or side opening oven door at counter height

Counter space for transferring items from refrigerator,

oven, sink, and cooktop

Contrasting color strip on counter edges

Side-by-side refrigerator/freezer with adjustable upper

shelves and pull-out lower shelves, or a freezer drawer

on the bottom

Raised dishwasher

Variety in counter height—some at table height (30")—

under-counter seated work area

Gas sensor near gas appliances


66

Home Design and Layout

Easy-open windows with low sills

Color contrast between walls and floors, matte finish

wall coverings

Adequate, accessible storage

Wide halls and doorways (interior doors and hinges can

be removed)

“Flex room” for family visits or live-in care provider

Attached garage with opener or covered carport, room

for wheelchair loading

Smoke and carbon monoxide detectors

Low-vision adaptations:

Anti-glare glass

Stick-on, tactile markers on controls

Contrasting color switch plates

Electrical-plug pullers

Home Care

Low-maintenance exterior (vinyl siding)

and landscaping

Housekeeping service

Repair service

Security and emergency alert service

Uncluttered, unobstructed exterior and

interior pathways

Easily accessible filters on HVAC units

Central vacuum system


67


What additional aging-in-place adaptations can you think of? Which

are low-cost or DIY items?

MAKE A SAFE PLAN FOR AGING IN PLACE When is a house, or a community, suitable for aging in place, and when is it right

to consider a move to another home or neighborhood? Remember these four

factors:

In the Community In the Home

Safety Does the neighborhood seem

unsafe? Are elderly residents

afraid to leave their homes? Is

the neighborhood declining?

Does the home have elements

that present risk, such as dim

lighting, steep stairs, no hand

rails, clutter, frayed wiring, or

structural problems?

Access Are shopping and services

accessible? Can the resident

easily access essential services—

grocery store, pharmacy, house

of worship, medical services, or

bank—without driving?

Are family and friends close by

or far away? Will an elderly

person be isolated and trapped

in the home? Is entry awkward

for the home or other areas?

Are cabinets, closets,

appliances, and storage

accessible?

Fits

needs

Does the community provide

support for aging in place? Is the

climate tolerable year-round?

Does the house still fit the needs

of the homeowners? Can the

owners handle the repair and

maintenance needs of an older

house?

Ease

of use

Does the community

infrastructure promote ease of

movement?

Can doors and hallways

accommodate a walker or

wheelchair? Can home features

be added or modified?

I-Note: LEAD a discussion of adaptations and home design features and adaptations using the checklists on the following pages. SUPPLEMENT the lists with additional examples based on your own experience, and INVITE students to contribute items. IDENTIFY low- and high-cost items, quick fixes, and DIY items. ASK, based on these principles, what kinds of adaptations could be made that would be helpful for both younger and older homeowners. EMPHASIZE that these features can be used as selling points when showing homes to 50+ clients and customers. Exam Question 16 Slide 82: Make a SAFE Plan for Aging in Place I-Note: PRESENT the SAFE approach to planning. INVITE students to add indicators to each factor.


68

OPPORTUNITIES FOR REAL ESTATE PROFESSIONALS As we have seen, home preferences and needs change as we age in place. The

“no urgent need” phase of the continuum may involve moving to an active adult

community, relocating to a better climate, or downsizing to a more manageable

home that frees the homeowner from maintenance responsibilities. The other

end of the continuum may involve helping a family sell an elderly relative’s

home. At every stage, real estate professionals have opportunities to work with

sellers and buyers as they make transitions. How can real estate professionals

help clients and customers plan and make the right choices for aging in place?

Share stories of how others have solved problems.

Help buyers evaluate a home, neighborhood, or community.

Discuss aging-in-place needs during buyer-counseling sessions.

When showing a home, point out the features that support aging in place.

Inform clients, customers, and their families of community services that

support aging in place.

Influence the community to develop aging-in-place support services.

What other opportunities can you think of?

Slide 83: Opportunities for Real Estate Professionals

I-Note: HIGHLIGHT opportunities for real estate professionals. ADD to the list and INVITE students to contribute ideas. NOTE that marketing and outreach will be covered in more detail in tomorrow’s class session.

69



70


71

Whether aging in place or moving to a new residence, the first phase of the 50+

market housing cycle involves independent living. For many, an age-targeted

community is the answer. The amenities, social activities, and freedom from

home maintenance offer the independence and security that fits the

preferences of many in the 50+ generations. The privately owned residences are

real estate assets, and providing services for buyers and sellers presents an

opportunity for real estate professionals.

Real estate professionals who work in markets that include age-targeted

communities and buildings need to know about housing options, amenities, and

policies. You can start by researching the communities, developments, and

housing options in your market area and learning about the opportunities.

THE HOUSING CYCLE Most seniors stay in their own homes in their 70s and 80s. When they do move

they relocate close to home and into smaller houses, apartments, condos, or

congregate or care settings. Assuming the trend for retirees to stay close to

home continues, the senior population of the next 10 to 15 years will likely be

geographically distributed in proportion to where baby boomers and their

parents now live. Closeness to adult children, whose careers are based in the

metro area, is a top consideration.

Experienced real estate practitioners describe retirement and home

ownership in four stages:

Upsize: Age 50

Pre- to early retirement. Preference is for a large house with room for the

grandchildren and other guests.

Downsize: Age 65

At this stage the grandchildren are teenagers or in college and are no

longer interested in spending spring break or summer vacation with their

grandparents. Adult children are involved in careers and do not have

much time to visit either. The trend is to downsize to a more manageable

property.

Half-back: Age 70–75+

Health begins to weaken. The spouse and friends may pass away and

community ties weaken. Elderly move back home, or half-back, to be

closer to children. Family members or adult children may be involved in

this transaction.

Slide 6: Chapter 5

Slide 85–Slide 86: The Housing Cycle

I-Note: DESCRIBE the housing cycle. ASK students how this model compares with their experiences.

Exam Question 17


72

Last home: Age 80–85+

The last move may entail selling the house or condo and moving to

independent senior communities that have continuum of care; in other

instances, seniors may need to transition to an assisted-living facility.

Expect the adult children to be involved in this transaction.

Over the course of their retirement years, mature adults may sell and buy

property several times as they progress through life and health stages. By

demonstrating your knowledge and ability to help them through the

transactions, you can gain a client for life. Mature adults are more likely to tell

others about good and bad service experiences. What would you like these

clients to say about doing business with you?

The opportunity for real estate professionals is that as a group, mature adults

will sell and buy, upsize and downsize, move to a new location and move back

or half-back to be close to family, move to assisted-living environments, and the

like over 20 or more years and as their lives and circumstances change. The real

estate professional who can win the client early on has the opportunity to

benefit from several transactions in the future. SRES® designees can attest that

people in their 50s start thinking about aging and issues with property for

themselves and their elder parents. When selling to this group, be cognizant

that you can become their real estate professional for life by demonstrating

your understanding and familiarity with the circumstances of their property and

lives and your ability to help them through the phases.

ACTIVE ADULT COMMUNITIES Communities welcome active retirees because they make the area attractive to

other high-income retirees who add to the tax base and make few demands on

community services.

Active adult retirement communities come in a variety of forms:

Single-family homes

Attached homes, duplexes, townhomes

Condominiums

Manufactured and mobile homes in a park, real estate owned or leased—

popular with “snowbirds”

Cluster housing that combines the maximum density of homes with large

common areas, such as gardens, clubhouses, tennis courts, swimming

pools, and community centers

Subdivisions

I-Note: PROVIDE an example of multiple transactions by one client as he or she aged.

I-Note: DESCRIBE housing options for active adults. NOTE that most can be owned as real estate.

Exam Question 18

Slide 87–Slide 88: Active Adult Communities


73

Cruise ship condominiums

Who buys into these communities? The Del Webb Company, the largest

developer of U.S. retirement communities, characterizes the active adult

consumer profile as follows:35

Socially, physically, and philosophically active

Technology-adept early adopter

Preference to be surrounded by “people like me”

More motivated by lifestyle than the actual house in choosing a

retirement home

Although concentrated in the South and West, active adult communities are

located throughout the country. Some of Del Webb’s newest active adult

communities are located close to metro areas for retirees who prefer a city

environment.

Active adult communities may offer a try-before-you-buy option for a short-

term stay at the facility. Potential residents have an opportunity to try out the

community facilities, get a feel for the atmosphere, meet other residents, and

evaluate whether it is a good fit for them.

Active adult communities offer a range of services, social events, amenities, and

activities to attract and serve residents. Services and amenities might include:

Social and recreational programs

Community center or clubhouse

Fitness facilities

Computer labs

Hobby and workshop facilities

Gardening plots

Libraries

Cultural and arts programs

Transportation on a schedule

Worship facilities, spiritual

counseling

Continuing education programs

Support groups

Outside maintenance and

referral services

Emergency and preventive

health care programs

Restaurants and meal

programs

35 Del Webb, “Key Trends and Shifts in Retirement,” Baby Boomer Survey.

Slide 89: Active Adult Communities— Most Desired Amenities

I-Note: DESCRIBE attractions and features of an active adult community. PROVIDE brochures on local communities as an illustration. DESCRIBE amenities. NOTE the communities that work with and compensate real estate professionals.


74

A National Association of Home Builders research study found that the most

desired amenities in an active adult community are:

Walking and jogging trails

Outdoor spaces

Public transportation

Lakes

Outdoor swimming pools

Security

Clubhouses

Exercise rooms

Business centers

Even if residents do not take advantage of all the amenities, they do understand

the value enhancement, particularly if they have a real estate ownership

interest in the community, such as a condominium or single-family home.

SENIORS APARTMENTS According to U.S. Census data, about one in five seniors are renters, either

always renters or former homeowners who sold their properties to become

renters. Reasons for becoming renters include circumstances such as:

Divorce (dividing equity)

Financial inability to pay mortgage, taxes, insurance, upkeep

Relocation closer to family and grandchildren (younger families often move

for job-related reasons)

Ability to free up equity for investment income

Freedom from home and garden maintenance

Freedom to travel

Seniors-only apartments suit those who can take care of themselves, are

relatively healthy, have sufficient funds to buy or rent the apartment, and want

to maintain independence and privacy. They offer social opportunities, comfort,

safety, and security, but no medical or custodial care. As noted earlier, some

apartment buildings become de facto senior housing by virtue of the age of the

residents.

The apartments, rental or condo, are usually small and easy to maintain. The

design may include assistive features such as shower seats, handrails, and

emergency alert devices. Residents may have access to services such as

recreational programs, transportation, and communal dining rooms.

I-Note: STATE that residents value amenities even if they do not use them because of the value enhancement.

Slide 90: Seniors Apartments

I-Note: DESCRIBE seniors-only apartments. INFORM students of any in the local area.

Exam Question 19


75

Some seniors-only apartments qualify as low-income housing and charge below-

market rents based on a set percentage of the resident’s income. These

apartments are subsidized by HUD, states, or community grants. HUD

affordability guidelines require expenditure of no more than 30 percent of the

county’s median income for housing. There is usually a long waiting list to move

into one of these facilities due to low turnover. Communities can encourage

construction of low-income senior housing through incentives, tax credits, and

zoning variances.

COHOUSING Cohousing communities are better characterized by philosophy and lifestyle

than by layout or styles of residence. They are self-contained, intentional

neighborhoods of privately owned residences, such as single-family or

townhomes, clustered around a courtyard and community center. Most are

small, typically 10–30 residences, and may be multi-generational or adult-

focused. From outward appearance, cohousing developments look like any

other clustered neighborhood; the emphasis on sharing and communal living

distinguishes the close-knit communities. Shared meals prepared by community

member volunteers and served several times a week in a communal dining

room are a distinguishing feature. Another is decision-making by consensus. The

cohousing approach harmonizes quite well with green living; mission

statements of the communities stress wise use of resources and environmental

stewardship through sharing as a community value.

Sunward Cohousing in Ann Arbor, Michigan, consists of 40 homes clustered on five acres. Tightly grouped housing and parking on the periphery preserves the

surrounding green space.

I-Note: DESCRIBE the concept of co-housing and its advantages for aging in the community.

Slide 91: Cohousing


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Adult-focused cohousing communities offer independence and the privacy of a

single-family home within a supportive community environment. According to

the Cohousing Association of the United States, the distinguishing

characteristics of elder cohousing are:

For new developments, future residents participate in designing the

community to meet their needs.

Common facilities designed for daily use are an integral part of the

community and are always supplemental to the private residences.

The neighborhood design encourages a sense of community.

Residents manage their own communities and do much of the work

required to maintain the property.

The community is governed by a homeowners association with an emphasis

on decision making by consensus.

The community and its services are not profit-making enterprises or a

source of income for its members.

AGE-RESTRICTED COMMUNITIES Age-restricted communities provide an environment in which seniors can meet

and make friends with people of the same age group and use facilities like

swimming pools and clubhouses in a peaceful atmosphere. But, for buyers who

have always lived in a single-family home, getting used to restrictions can be an

adjustment.

When working with clients who are interested in age-restricted communities,

the real estate professional should alert prospective residents about the

regulations and restrictions. For example, are pets allowed? How long can

grandchildren and guests stay? Are there restrictions on children using facilities?

Most age-restricted communities try to find a balance so that residents can

enjoy both the community benefits and the company of children and

grandchildren. For example, grandchildren or underage children can usually stay

for up to several weeks, although the allowance varies widely from facility to

facility. On the other hand, residents may be grateful for the age restriction that

prevents an adult child from moving in with parents, thus avoiding an awkward

situation.

As a real estate professional, you should learn about the age-restricted

communities and facilities in your market area. Make an effort to become

familiar with the rules and covenants and get acquainted with the HOAs, their

Slide 92–Slide 93: Age-Restricted Communities

I-Note: DESCRIBE why seniors are attracted to these communities.

Exam Question 20


77

officers, and staff. Demonstrating your ability to work with the community and

bring qualified clients to it can result in referrals.

Is it the responsibility of the real estate professional to verify a client’s eligibility

for age-restricted housing? Real estate professionals must inform clients if a

property is age-restricted and advise them that they will be expected to comply

with community policies. But there is no obligation to verify a prospect’s age or

eligibility.

NAR strongly suggests that before the MLS advertises any property as housing

for older persons, it should require the listing broker to provide the MLS with a

copy of the written statement of qualification on which the broker is relying.

When working with buyers or sellers in an age-restricted community, a real

estate professional should ask to see the community’s statement of policies and

keep a copy in the transaction file. Check with your MLS for guidelines on

advertising. The advertising phrases “qualified housing for older persons” or

“community intended for those 55 and older" are preferable; phrases such as

“adult living” or “adult community” generally should be avoided because they

are not consistent with demonstrating the intent required by the federal

Housing for Older Persons Act (HOPA).

HOUSING FOR OLDER PERSONS ACT HOPA allows age-restricted housing by carving out an exemption to the federal

fair housing law prohibition against discrimination on the basis of familial status.

For all levels of age restriction, it is important to note that the requirements

apply to the occupants, not the owners. Federal law sets forth two levels of age-

restricted housing:

55+ housing

80 percent of units must be occupied by at least one person age 55 or older per unit.

Maximum 20 percent of units may be occupied by residents under age 55.

62+ housing

All residents must be at least age 62.

The facility must publish, and adhere to, policies and procedures that

demonstrate the intent to provide housing for older persons.

Residents’ ages must be verified through reliable surveys or affidavits.

No programs of planned activities are required for either 55+ or 62+

housing.

I-Note: OBSERVE that

age-restricted

communities are HOPA

in action. STATE that

real estate

professionals are not

required to verify the

age eligibility of

prospects. They must

inform the prospect

that the facility is age

restricted and age

criteria must be met.

Slide 94–Slide 95: Housing for Older Persons Act

Exam Question 21

I-Note: PRESENT the basics of HOPA. STRESS that the rules apply to the occupants, not the owners.


78

More Restrictive Limits

If state law allows, facilities may establish more restrictive age limitations such

as 80 percent of the units must be occupied by at least one person age 60 or

older, or exclusively by persons age 55 or older, or all units must be occupied by

at least one person age 55 or older.

80/20 Occupancy Requirement

The 80/20 rule prevents loss of exemption due to situations in which a surviving

spouse or heir wants to occupy the unit. Units in the 20 percent portion are not

marketed to prospective occupants who are underage. A healthcare attendant

or family-member care provider is excluded from the calculation, whether the

live-in care provider resides in the same or a separate unit. As noted above, the

occupants of the units are counted, not the owners. If an age 55+ owner or

occupant vacates a unit for a period of time and rents it to an underage

individual, the tenant would be counted in the 20 percent portion. The age 55+

occupant may, however, be absent for a time (vacation, hospitalization, or

seasonal absence) without jeopardizing the exemption status of the community.

The community may restrict use of facilities,

such as a swimming pool, by children and restrict how long children may stay as guests with the unit owner or occupant.

? Discussion Question What age-targeted communities are located in your market area?

I-Note: EXPLAIN how the 80/20 rule is used by HOPA communities.

I-Note: LEAD a discussion of age-targeted communities in the market area. NOTE if they work with real estate professionals.

79



80


81

When health or life circumstances change, living arrangements may need to

change too. Homeowners, and their families, experiencing such a life transition

want a living arrangement that maintains privacy and an appropriate level of

independence but also provides safety and security. Choosing an appropriate

level of care begins with an objective assessment of needs and capabilities.

Normal, healthy aging does not necessarily require a medically oriented

environment, but declining strength, stamina, mobility, and mental acuity may

necessitate assistance for accomplishing some daily activities, like meal

preparation.

Where does the real estate professional fit into this picture? Selling a longtime

home may be part of the transition to an assisted-living arrangement, and

families may be unaware of the options that are available in the community. A

specialist can provide helpful insight on how others have made similar

transitions, information on helpful services, and assurance that a successful

transition can be accomplished. Some congregate, assisted, and continuing-care

facilities work with real estate professionals. When a resident needs to sell a

home, a specialist who has a reputation as a trusted and understanding

resource may receive a referral from the facility.

WHEN IS IT TIME TO MAKE A TRANSITION? The ability to perform key activities of daily living (ADLs) provides an objective

standard to determine the right time for making a transition and choosing the

right level of care and type of facility. The list can also guide decisions about

aging in place and in-home assistance.

Activities of Daily Living

Bathing

Dressing

Toileting

Eating

Transferring (e.g., moving from a bed to a chair)

Maintaining continence

Instrumental ADLs, a secondary list, are required activities for independent

living; some examples are using the telephone, grocery shopping, doing laundry,

and managing medications.

Up to age 85, most people report little or no difficulty with ADLs and about one-

third of those who experience an ADL disability recover. After age 85, more than

three-quarters report some degree of permanent limitation, and more women

than men report more limitations.

Slide 97: When Circumstances Change

Slide 98: Where Does the Real Estate Professional Fit In?

I-Note: EXPLAIN how the real estate professional can help families and elders making a transition.

Slide 99: When Is It Time to Make a Transition?

Exam Question 22

Slide 100–Slide 101: Activities of Daily Living

I-Note: ENUMERATE ADL guidelines.


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DOWNSIZING Perhaps the most daunting aspect of downsizing, even for those looking forward

to a new living situation, is sorting through and getting rid of a lifetime’s

accumulation of stuff. When the health and safety risks outweigh remaining in a

home, it’s time to find another living situation. But even when events are not at

crisis stage and everyone, including the homeowners, agree on the need to

make a transition, taking action can run up against some challenging obstacles—

physical and emotional. What stops people from making a transition to a new

living situation?

Obstacles

Fear of change and loss of familiar routines that define and give meaning to

daily life

Fear of loss of independence, control, and privacy, or fear of abandonment

Fear of making a wrong and irrevocable decision

Emotional attachment to a home or place—adult children may be more

sentimentally attached and resistant to breaking up a family home than

their parents

Determination to hold on to a property so that heirs inherit it

House locked financially or by deferred maintenance issues

Physical and cognitive limitations that prevent taking action

Realization that a move is to a last living situation and remaining time is

short

Overwhelmed by the tasks involved in selling and moving

Lack of family or a support network to assist

Misapprehension that remaining in the home is “living for free”

Slide 102–Slide 104: Downsizing

Exam Question 23

I-Note: COMMENT on obstacles that keep people from making transitions and what the real estate professional can do.


83

What Can a Real Estate Professional Do?

Acknowledge the challenges and conditions that prevent making a move.

Respect that what seems like a minor problem to you or other family

members may loom large for an elder homeowner.

Offer assurance that obstacles can be overcome and describe how others

have handled similar situations.

Provide information about resources, services, and expert guidance

including a trustworthy provider list, or team of professionals, who are

backed by the Better Business Bureau (BBB).

Acknowledge wary seniors and provide them with your credentials to build

trust in your expertise.

Know the Terminology

DOWNSIZE Reducing household inventory in preparation for a move to a smaller home.

DECLUTTER Removing accumulated items that make a home unsafe and unhygienic. Focus

on fire and fall prevention and removal of hazards.

DISBAND Dismantling the entire household.

Can Family Help?

Families can be a loving support when relatives make a transition. In the best

circumstances, the elder relative is in control and family members provide

support and elbow grease. But family members may live far away or might be

juggling career and family demands and are unable to offer much help. On the

other hand, family members may become over-assertive and completely

disregard the relatives’ feelings, attachments, fears, and preferences. There are

times, however, when family members must step in and take control for the

health and safety of the elder relative, when the elder is incapacitated physically

or cognitively, or when a deadline looms such as a closing date or admittance to

an assisted-living facility. Experienced specialists can probably describe

numerous examples along the spectrum between assisting and asserting.

Slide 105: What Can You Do?

I-Note: PROVIDE tips and strategies for downsizing.


84

Downsizing Strategies

Space Planning

Subtract the square footage

of the future home from the

current home.

Add in new square footage

like a den, deck, or sunroom.

Measure furniture to be

moved to ensure fit.

Ask if the facility—senior

development, assisted living,

continuing care—can

provide space-planning

assistance.

Sort into Categories

Use various colors of Post-It

Notes® to help sort items into

categories:

Move

Maybe—move and decide

later

Sell—at auction, estate sale,

yard sale

Give away—to family

members or friends

Donate—to charitable

organizations

Throw out

Assess Future Needs

Is it family-sized?

Items like large camping

tents probably won’t be

needed.

Will it fit?

Compare size and square

footage; a space planner can

help.

Is it house-oriented?

If moving to a condo or

townhouse, get rid of lawn

mowers, snow blowers, and

large gardening tools.

Throw-Out Strategies

Resist the “maybe we’ll need

it sometime” mindset.

If it hasn’t been touched for

more than a year, throw it

away.

Consider if it’s worth the

cost and effort to pack,

move, and unpack.

Still can’t decide? Put it in a

sealed, unlabeled, and dated

box; if unopened a year

later, throw it away,

unopened.

Give Keepsakes to Children

Give childhood arts, crafts,

and family photos to

children; they may cherish

them and use them to start

their own family traditions.

Receiving meaningful

keepsakes may ease the pain

of breaking sentimental ties

to the family home.

Ask children to sort items:

Take now Take next time Give away Throw away

Managing Time

Allow time: Most downsizing

processes take 2–3 months.

Start early: Begin the

process before the house is

listed. If it sells quickly, there

will be less time for

accomplishing the tasks.

Schedule: Set a schedule by

room, week, month, or

other milestones.

Take time: Spreading out the

process makes it less

emotionally wrenching.

Can Family Help?

Some families assist, and some assert.

A good indicator is the way a family behaves during Thanksgiving or while making vacation plans

together.

Prepare to Feel Good

When the process of downsizing is complete, most people feel relieved and good about reducing the

amount of accumulated stuff.


85

Professional Assistance

When the tasks of sorting, packing, moving, and unpacking are beyond the

capabilities of homeowners and their family, or events necessitate a quick

move, a specialist in senior transitions could be the solution. These

professionals, such as a Certified Relocation and Transition Specialist (CRTS®),

handle all the phases and tasks of downsizing, moving, decluttering, or

disbanding a senior’s home. They can sort through all the stuff, arrange for

dispersal and disposal of items, prepare a space plan to make sure furniture will

fit in a new living situation, pack, and unpack. Fees may be on an hourly basis,

by task, or for an entire project, and it is wise to ask for an estimate of costs

before making a commitment. For more information about these professionals,

go to the CRTS® website at www.crtscertification.com.

Decluttering

In some circumstances, out-of-control clutter threatens the health and safety of

homeowners. Decluttering a home may enable elderly family members to

continue living in their own home. However, clutter may also signal underlying

emotional or cognitive problems. It may be necessary to move the homeowner,

and pets, to the new living situation before the decluttering process can be

accomplished. How can a family begin the decluttering process?36

Focus on safety first by removing fall and fire hazards.

Start small and slow. Unless a deadline is imminent—eviction, closing

date, admittance date to a nursing home or senior apartment—working at

the elder’s pace lessens the stress. Start small by cleaning a corner of a

room or a tabletop.

Remove discarded items immediately so that they cannot be “resaved” by

the elder.

Reorganize items into a limited number of categories—keep, sell, give

away—to help initiate the process and make it easier to throw out items.

Negotiate and compromise over what to keep or discard. It may be OK to

keep the past couple of years' worth of accumulated magazines and

discard the previous 10–20 years’ worth.

Photographs of memorabilia, which the elder can keep, may make it

easier to let go of and disperse sentimental items to other family

members.

36 Adapted from “Best Practices: Decluttering Tips,” Weill Medical College of Cornell University, Department of Environmental Geriatrics, www.environmentalgeriatrics.org.

Slide 106: Professional Assistance

I-Note: ENCOURAGE students to add a CRTSTM to their team.

Slide 107: Decluttering

I-Note: DISTINGUISH issues of clutter and hoarding from downsizing.


86

Safeguard valuables as they surface, such as jewelry, works of art,

authentic and valuable antiques, and collectibles.

When the job is completed, make a plan for maintenance so that the

home doesn’t become recluttered.

Hoarding

Hoarding is often a symptom of dementia and extremely impaired judgment.

“Individuals with dementias are continuously losing parts of their lives. Losing

a meaningful role in life, an income, friends, family, and a good memory can

have an impact on a person’s need to hoard or to ‘keep things safe.’ Hoarding

… is oftentimes triggered by the fear of being robbed.” People with dementia

may hide possessions for safekeeping, forget where they hid them, and blame

others for stealing them.37 For authoritative research and information about

hoarding, including tips on dealing with clutter, rummaging, and hoarding, go

to the website for the Department of Environmental Geriatrics of Cornell

University: www.environmentalgeriatrics.org.

CONGREGATE LIVING Congregate living (also known as residential care, custodial care, or support

housing) combines independent living and privacy with the safety of round-the-

clock supervision care. The facilities offer fully equipped private apartments

ranging from one-room studios to two-bedroom units and common areas where

residents can socialize. Most units rent on a monthly basis.

Services may include cleaning and laundry service, transportation for medical

appointments and shopping, and social activities. Meals served in a common-

area dining room are usually included in a monthly rental, but residents have

the option to prepare meals in their own apartments. Most importantly, a staff

person is always available to assist residents and check on their well-being.

Medical care is generally not available, although staff may assist residents with

self-medication.

Congregate facilities may have entry criteria for age and abilities as well as rules

for when a resident must transfer from the facility. For example, a resident in

early stages of Alzheimer’s disease may be accepted but expected to transfer to

a specialized facility in later stages.

37 Rosemary Bake, and Paulette Michaud, “Working with Individuals with Dementia Who Rummage and Hoard,” Department of Environmental Geriatrics, Weill Medical College of Cornell University, www.environmentalgeriatrics.org.

Slide 108: Hoarding

Slide 109: Congregate Living

I-Note: DESCRIBE congregate housing. PRESENT the advantages. INFORM students of local facilities and advise whether the units are rental or owned.

http://www.environmentalgeriatrics.org/


87

ASSISTED LIVING Assisted-living facilities provide a residence for those who need help with daily

activities such as cooking, housekeeping, and transportation, as well as personal

care such as bathing, dressing, grooming, and eating. They are best suited for

those who are ambulatory and do not need nursing care but cannot live on their

own. Living arrangements are usually a small apartment or a single or double

room, which offers more privacy than a nursing home environment but less

than congregate housing.

Assisted-living facilities should be expected to offer:

Laundry services

Transportation

Personal care

Housekeeping

Shopping

Exercise classes (usually seated)

Help with medications

Activities (social, religious, educational)

Three meals daily with provisions for low-sodium, diabetic, and heart-

healthy menus

When Is Assisted Living the Right Option?

Some signs that indicate a need for assistance include:

Personal hygiene declines, such as not bathing, wearing the same clothes, or

sleeping in clothes.

Responses to questions about well-being are passive.

A home that was formerly neat becomes disordered and dirty.

The refrigerator and pantry look empty, or an over-reliance on take-out

food becomes apparent.

Lethargy or fatigue replaces activity.

Forgetfulness that causes peril, such as food left cooking on the stove,

phone off the hook, bills unpaid, and medications skipped.

Slide 110: Assisted Living

Exam Question 24

I-Note: DISTINGUISH assisted living from custodial, congregate living. ADVISE students of local facilities and whether the units are rented or owned.

About three-quarters of those age 85 and older report some

degree of permanent limitation in

performing ADLs.

Slide 111: When is Assisted Living the Right Option?


88

CONTINUING CARE RETIREMENT COMMUNITIES Continuing care retirement communities (CCRCs) offer increasing levels of care

at one location as the needs of the resident change. It provides the choice of

moving between the housing environment and degrees of service within one

community, as well as the security of being taken care of through stages of

health and aging. CCRCs provide a solution to the problem of how to secure and

pay for future long-term care, as well as how to choose a facility at a time of

vulnerability.

Contracts for CCRCs

According to the U.S. Government Accountability Office, CCRCs typically operate

under one of the following types of contracts:38

Type A/Life Care: includes housing, residential services, amenities, and

unlimited use of health care services with no (or minimal) increase in fees. A

substantial entrance fee is usually required, but monthly payments do not

increase.

Type B/Modified: same housing and residential services and amenities as

Life Care, but health care services are limited, such as 60 days of nursing

care. Fees increase when a resident’s care needs exceed included services.

Type C/Fee-for-Service: same housing and residential services and

amenities as Life Care, but health care expenses are paid by the resident on

an as-needed basis.

Type D/Rental: a pay-as-you-go option and typically the least expensive. No

entrance fee is required. The resident pays all health expenses, but access

to CCRC health care services is guaranteed.

38 U.S. Government Accountability Office, “Older Americans, Continuing Care Retirement Communities Can Provide Benefits, but Not Without Some Risk,” Report to the Chairman, Special Committee on Aging, U.S. Senate, www.gao.gov.

Slide 112: Continuing Care Retirement Communities

I-Note: DESCRIBE CCRCs. INFORM students of local facilities.

Slide 113: Contracts for CCRCs

Exam Question 25


89

Range of CCRC Fees by Contract Type

Type A

Life Care

Type B

Modified

Type C

Fee for

Service

Type D

Rental

Entry

fee

$160,000–

$600,000

$80,000–

$750,000

$100,000–

$500,000

$1,800–

$30,000

Independent

living monthly

fee

$2,500–

$5,400

$1,500–

$2,500

$1,300–

$4,3000

$900–

$2,700

Assisted living

monthly fee

$2,500–

$5,400

$1,500–

$2,500

$3,700–

$5,800

$4,700–

$6,500

Nursing care

monthly fee

$2,500–

$5,400

$1,500–

$2,500

$8,100–

$10,000

$8,100–

$10,000

Source: Report to the Chairman, Special Committee on Aging, U.S. Senate, GAO-10-611, U.S. Government Accountability Office

Paying the CCRC entrance fee may use up a life’s savings or the entire proceeds

from the sale of a home. Like any major investment, it requires careful

evaluation of the facility, its services, and its financial condition. An attorney

should review the contract, in particular the policy on return of deposits; some

CCRCs refund a resident’s deposit only when a new resident buys in or a unit is

reoccupied. In a slow market, when a resident must wait for a home to sell

before moving into the CCRC, refund of a deposit can be delayed for several

years.

In addition to checking financial conditions and policies, prospective residents

should investigate the facility’s policies regarding involuntary transfers to higher

levels of care, life changes such as a marriage or death of a spouse, and

affiliation with any religious or charitable group.

CCRC facilities are state-regulated. Hearings before the U.S. Senate Special

Committee on Aging focused attention on CCRCs and published

recommendations for state regulations and best practices.39

39 Continuing Care Retirement Communities: Risks to Seniors,” Summary of Committee Investigation, U.S. Senate Special Committee on Aging, July 21, 2010.

Slide 114: A Major Investment

I-Note: EMPHASIZE the importance of careful review and full understanding of CCRC contracts.


90

Evaluating Assisted-Living and Continuing Care Retirement Facilities

Go to these websites for evaluation guidelines and information:

American Seniors Housing Association (ASHA)

www.seniorshousing.org

Commission on Accreditation of Rehabilitation Facilities—Continuing Care

Accreditation Commission

www.carf.org

Justice in Aging

www.nsclc.org

Leading Age

www.leadingage.org

U.S. Government Accountability Office

www.gao.gov

SKILLED NURSING FACILITIES

Skilled nursing facilities (nursing homes) provide round-the-clock medical and

personal care. It is estimated that about 20 percent of elders will experience a

nursing home stay. These facilities are staffed by registered nurses, practical

nurses, and nurses' aides. They can be freestanding or part of a CCRC.

There are two categories of nursing home residents:

Short-term residents recuperating from surgery or illness, or needing

physical therapy

Long-term residents who cannot care for themselves and need medical and

custodial care beyond the capability of an assisted-living facility

Most offer a combination of private and semiprivate rooms, and shared

bathrooms, either with roommates or between two private rooms. Unlike

assisted living, nursing homes treat patients medically. Therefore, the program

of social activities is usually minimal.

The range of quality is vast for these facilities. Anyone considering a nursing

home for a family member’s care should evaluate the facility against several

checklists, visit the facility unannounced, and ask lots of questions. It is not

uncommon for long-term residents of these facilities to be frail and suffer from

significant cognitive impairment or dementias; they are the least able to be

proactive and protect themselves. On the positive side, nursing homes in most

Slide 115: Skilled Nursing Facilities

http://www.seniorshousing.org/

http://www.carf.org/

http://www.nsclc.org/

http://www.leadingage.org/

http://www.gao.gov/


91

states must meet regulations and be open for regular inspection. They fulfill a

need, and many are operated by kind, caring, cheerful staff.

MORE CARE OPTIONS

Elder Care

Elder care is an umbrella term for the variety of services and care for those

needing assistance with ADLs. It covers a spectrum of services, from light to

intense care, at home or in assisted facilities. Elder care includes services such

as:

Meals

Socialization

Personal care

Light housekeeping in the home

Adult day care

Transportation Visiting

Telephone reassurance

Caregiver support

Respite care

Emergency response

Program of All-Inclusive Care for the Elderly

The Program of All-Inclusive Care for the Elderly (PACE) presents a model for

delivery of coordinated elder care. PACE was authorized by the federal Balanced

Budget Act (BBA) of 1997. The BBA established the PACE model of care within

the Medicare program and enabled states to provide PACE services to Medicare

and Medicaid beneficiaries. Not-for-profit organizations administer the

programs at the community level and coordinate service delivery both at home

and in assisted and nursing home facilities. PACE providers receive monthly

Medicare and Medicaid payments for each eligible enrollee.

The PACE model is based on the concept that it is better for the well-being of

elders and their families to be served in the community whenever possible. The

programs provide a range of care and services so that participants can maintain

independence and continue to live in their homes as long as possible.

PACE programs offer home-based services and coordinated care, such as home

health care, assistance with medications and injections, meals on wheels,

assistance with ADLs, housekeeping, laundry, social work, and adult day care.

Although enrollment in a PACE program requires certification for nursing home

care, very few actually reside in one. But if an enrollee does need nursing home

care, the PACE program coordinates payment for it and continues to coordinate

care.

Slide 116: More Care Options

I-Note: SUMMARIZE additional care options. ADD other examples if known.

I-Note: DESCRIBE the PACE concept. INFORM students if there is a PACE program in the area. LOCATE a local program at www.npaonline.org.


92

Shared Housing

A simple solution, shared housing involves sharing a home with a roommate, in

one’s own home or that of another. Some community organizations help with

matching up those who want to share their homes or find roommates.

Board and Care

Board and care are simple, small-scale assisted-living facilities for personal and

custodial care. Some are in converted private homes, with a few residents,

typically four to 10, and operate on an unofficial basis. These are also known as

foster care, group homes, or domiciliary homes. These facilities are suitable for

those who cannot live independently and need assistance with activities of daily

living, but do not need a nursing home environment. Long-term insurance

policies may cover the expense.

Residential Care Facilities for the Elderly

Residential care facilities for the elderly (RCFEs) provide more independence

than a nursing home. They assist with activities of daily living but not medical

care, although staff may help residents take medications. RCFEs usually charge

one basic price for a package of services, with added fees for additional services

or deductions for unused services. Residence is a landlord-tenant relationship.

Elder Cottage Housing Opportunity

The term elder cottage housing opportunity (ECHO), originating in Australia,

refers to a mobile or modular home placed on the single-family lot. When no

longer needed, the ECHO unit is moved to another location and rented to

another family. Before making arrangements for stationing an ECHO unit on a

property, area zoning regulations should be checked. Placement of ECHO units

encounters fewer obstacles in rural locations. In addition to zoning, ECHO unit

issues involve electrical, water, and waste disposal hookups and removing the

unit from the property when no longer needed.

Accessory Units

Living spaces added to a single-family home are called by different names—

granny flat, mother-in-law flat, or accessory unit—in different parts of the

country. The units can be apartments within a home, flats over a garage,

freestanding structures, or add-ons with a separate entrance. They are usually

site-built and attached to the main home, and remain functional after the elder

occupant is no longer living or has moved to a care facility.

A legal second unit usually requires a separate entrance, bathroom, bedroom,

and cooking facility. The first step in planning for an ECHO unit is to check

whether second units are legal within the jurisdiction. A zoning variance may be

required.

I-Note: DESCRIBE ECHO and accessory unit housing. INFORM students of local zoning regulations regarding accessory units and the local terminology for it.

Exam Question 26


93

A parent might use some of the proceeds from the sale of a home to pay for the

construction. A home equity loan is another method of financing the

construction. The addition of another living unit usually enhances the value of

the main home.

Senior Day Care and Senior Centers

Although not a form of housing, senior day care facilities can help elders stay in

their homes longer. These facilities fill in the gap when the caregiver must work

during the day or needs a respite. Day care centers offer supervision, usually a

noon meal, social and educational activities, and support groups. Some offer

nursing and therapy services, as well as health monitoring.

Respite Care

Respite care allows caretakers occasional time off to recoup emotionally, handle

other family responsibilities, or get away for a while. In-home respite care

workers come daily or stay in the home with the elder. An alternative is a short-

term stay in an assisted-living facility, if space is available. A short-term stay may

be possible and provides an opportunity to try out the facility without making a

commitment to move there permanently.

Memory Care Facilities

Memory care facilities specialize in care of patients with Alzheimer’s and other

types of dementia. Congregate, assisted-living, or board-and-care environments

may be appropriate for residents in early stages. However, unless the

community has a specialized unit, transfer to another facility will be required as

the disease progresses. Families who want to care for an Alzheimer’s patient at

home need to consider questions such as:

Can the environment be made secure and safe?

Are in-home respite services available, such as nurses, home health aides,

homemakers, and companions?

Can the caregiver access respite care?

Is there a senior adult day care facility available?

Are there opportunities for social interaction, mental stimulation, and

recreation for the Alzheimer’s patient?

I-Note: DESCRIBE senior day care and INFORM students of local centers.

I-Note: DESCRIBE memory care facilities and NOTE that they serve a special need.


94

Regulation of Care Facilities

Various state agencies regulate different types

of facilities. Licensing and classification are

based on levels and types of service and

staffing. There are no standard definitions from

state to state, or sometimes within a state. Two

different “retirement centers” or “assisted-

living” facilities within the same state may be

licensed by different agencies and operate

under different rules and standards. There is no

federal regulation. However, federal regulations

do require that long-term care facilities provide

a 30-day written notice and discharge plan if it

is determined that a resident can no longer

remain there.

WHAT WILL MEDICARE OR MEDICAID PAY FOR?

Medicare will pay for a stay in a nursing home of up to 90 days that immediately

follows a hospital stay of more than 3 days and focuses on recovery and

rehabilitation. Medicare does not, however, pay for custodial or long-term care

in assisted-living facilities. Payment for assisted living is usually out-of-pocket,

although long-term care insurance may cover nursing home care. Medicare

does not pay for any care received outside of the United States.

Medicaid is a needs-based public assistance program with stringent eligibility

criteria and should be viewed as the payer of last resort. Medicaid payment may

be available for stays in facilities licensed as nursing homes (if the individual

qualifies for benefits) but not assisted-living and congregate facilities. The

federal government funds Medicaid but it is administered by states, which have

latitude in implementing policy guidelines.

Every state offers multiple Medicaid programs for the elderly and each program

has its own eligibility requirements. The Medicaid program has different names

in different states. Although there are many variations among states, basic

eligibility rules limit both assets and income. As a rule of thumb, liquid assets

may not exceed $2,250 ($3,000 for couples in most states) and income may not

exceed a capped amount or must be spent down on medical needs.

In most states, home equity of $572,000 or more is disqualifies an individual for Medicaid benefits. A few states set a higher home equity limit of $858,00040 and California has no limit. Fortunately, the equity in a senior’s home is exempt if a spouse or minor or disabled child resides in the home Because a home with less

40 Connecticut, Washington D.C., Hawaii, Idaho, Maine, Massachusetts, New Jersey, New Mexico, New York. Wisconsin limit is $750,000.

I-Note: PROVIDE information on state regulatory agencies and definitions of facilities.

Slide 117: Medicare Does NOT Pay For

I-Note: REVIEW Medicare and Medicaid payment options and issues. INFORM students of the title of the state program Medicaid for seniors. EMPHASIZE that Medicaid is a payer of last resort.

Slide 118: Medicaid

Exam Question 27


95

than the allowable amount of equity is a non-countable asset, a senior might be able to reduce countable assets by transferring value into the home, such as paying off outstanding home loans, buying a larger home, or paying for repairs or renovations. Payments from a reverse mortgage do not necessarily disqualify a Medicaid recipient, but any income must be spent in the month in which it is received; the remainder is considered a liquid asset. If at any time the recipient accumulates $2,000 or more in liquid assets, eligibility can be lost.

Medicaid Look Back

A person cannot immediately qualify for Medicaid by transferring or gifting

assets to someone else, such as a child,41 because there is a five-year look-back

period for eligibility. A real estate professional should make clients aware of this

look-back provision if they, or their loved ones, are selling to enter a nursing

home and expect Medicaid to cover the expense. In most states, Medicaid will

not kick in until all liquid assets are spent down.

Medicaid Estate Recovery

Federal law requires states to recover payments made to Medicaid beneficiaries

for nursing home facilities, home care, and related hospital and prescription

drug expenses. States also recover payments made to permanently

institutionalized individuals.

Medicaid recovers expenses through two types of liens:

Estate recovery lien placed on the property of the deceased

Tax Equity and Fiscal Responsibility Act (TEFRA) lien placed on the property

of a living beneficiary

When a Medicaid recipient dies, the state files a claim in probate court.

Surviving heirs are not required to use their own funds to repay the debt owed

to the state; however, if the home is subject to an estate recovery lien, the heirs

may want to use their own funds to pay the Medicaid claim and keep the home.

States are required to waive recovery of expenditures if it would result in undue

hardship or impoverishment of the spouse or heirs—for example, when a family

farm is the sole income-producing asset of the survivors.

Regulations on the use of Medicaid cost recovery vary widely from state to

state. It is important for the real estate professional to be aware of state

regulations when working with a client who anticipates selling a home before

moving into a care facility and plans to apply for Medicaid benefits. The seller or

family would also be wise to consult with an attorney specializing in elder care

issues.

41 Medicaid allows transfer of the home without asset penalty to a spouse, a dependent child who is a minor or disabled, a sibling who has been living in the home and providing care for at least one year, or a child who has been living in the home and providing care for at least two years.

Slide 119: Medicaid Look Back

Slide 120: Medicaid Estate Recovery

I-Note: CAUTION students on Medicaid look back and estate recovery regulations. RECOMMEND that they advise sellers intending to stay in a Medicaid-paid facility to investigate the impact of these regulations.


96

Medicaid Planners

It’s a good idea to add a Medicaid planning professional to your resource bank

of experts. Applying for Medicaid is a complex process and rules change

frequently. Most states have multiple programs with different eligibility rules.

Professional Medicaid planners help families compile documentation, complete

the application process, structure financial resources, and manage asset

transfers including protection of a family home and income for a healthy spouse

to live independently. Find a Medicaid planner in your area at

www.medicaidplanningassistance.org/find-a-medicaid-planner.

http://www.medicaidplanningassistance.org/find-a-medicaid-planner

97



98


99

For many age 50+ homeowners, their home represents the largest asset and the

equity in it is the chief source of net worth. Despite recent economic conditions,

many homeowners have substantial equity through mortgage pay-down and

value appreciation.

Do These Scenarios Sound Familiar?

Retirees would like to make a transition—downsize, upsize, move to a

better neighborhood or active adult community or a more accessible

home—but are waiting to get the right price so that they can pay cash for

the new home and avoid mortgage payments.

Elderly homeowners are about to lose a home to foreclosure because their

fixed income hasn’t kept up with the cost of living and mortgage payments

are unaffordable.

An elderly homeowner can’t relocate from a declining neighborhood

because the sale proceeds from the current home won’t be enough to buy

in a better area.

A family is struggling to find a way for an elderly relative to stay safely in a

long-time home, but her income isn’t enough to pay for in-home assistance.

Retirees would like to buy a second home, but they don’t want the

responsibility or financial drain of mortgage payments.

Every real estate professional specializing in the 50+ market has encountered

these or similar scenarios. The questions are:

How can home equity be used to maintain and improve quality of life,

accomplish the next transition, or just stop mortgage payments?

How can real estate professionals close more transactions and help clients

accomplish their goals?

In this chapter, we will explore reverse mortgage financing solutions. As a real

estate professional, you can help clients, customers, and families by making

them aware of the possibilities and guiding them to the finance professionals

who can make it happen. You could be a hero.

I-Note: PREFACE the discussion of reverse mortgage financing. DESCRIBE scenarios in which it is a solution. ADD examples from your own experience.

Slide 122: Do These Scenarios Sound Familiar?


100

WHAT CAN A REVERSE MORTGAGE ACCOMPLISH? A reverse mortgage converts home equity into cash. Like a forward mortgage,

the borrower’s home secures the loan. It is called a reverse mortgage because

money paid in by the homeowners over the years plus value appreciation is paid

back to the homeowners, who retain the title and continue to live in the home.

When tapping into home equity increases cash flow or enables a change in living

situation, homeowners can increase their options and enhance their quality of

life. Allaying money worries diminishes stress and contributes to a longer,

healthier, and happier life. A reverse mortgage can:

Supplement Social Security, pension income, or public assistance benefits.

Postpone drawing Social Security benefits, thus increasing the monthly

benefit.

Provide an income the borrower cannot outlive.

Stop mortgage payments.

Prevent foreclosure.

Pay for in-home care, medical expenses, and long-term care insurance.

Prepare a home for aging in place.

Pay off credit cards, debts, and existing mortgage balances.

Buy a second home or a new home.

Upsize, downsize, move to an active community, or relocate closer to

family.

Slide 123:–Slide 124: What Can a Reverse Mortgage Accomplish?

I-Note: PROVIDE examples of what a reverse mortgage can accomplish. EXPAND the lists with examples from your own experience.


101

HOW DO REVERSE MORTGAGE WORK? In order to understand how a reverse mortgage works, it helps to compare it

with a conventional mortgage.

Conventional Mortgage Reverse Mortgage

Purpose Provide funds for purchase of

a property.

Provide income for a variety

of purposes.

Funds Dispersed in a lump sum for

the payment to the seller.

Dispersed in monthly

payments, lump sum, or as

needed.

Payments Borrower makes monthly

payments to the lender to pay

down the loan.

Lender makes payments to

the borrower.

Approval

Criteria

Purchase price and value of

the property, down payment,

borrower’s income,

creditworthiness, financial

assets, and other debt

obligations.

Value of property, the

borrower’s equity, age, and

ability to maintain the

property.

Lender’s

ROI

Repayment of the loan along

with interest.

Proceeds from the eventual

sale of the property.

Loan

Balance

Decreases with each

payment.

Increases with each

payment.

Borrower’s

Equity

Increases with each

payment.

Decreases with each

payment.

Negative Amortization

Reverse mortgages amortize negatively. The payments the borrower receives

add to the balance owed at the end of the loan and interest accrues at a fixed or

adjustable rate. But the borrower will never owe more than the property is

worth, nor can the lender seek access to other assets.

Borrower’s Obligations

The lender places a lien on the property, but as long as the borrower lives in and

maintains the home, there is never any repayment obligation. Events that

trigger repayment include a move to another home as principal residence or

permanent absence (12 months or more), a specified maturity date, death of

the last surviving homeowner, sale of the property, and failure to pay taxes and

insurance or make repairs. The borrower may pay off the loan through the sale

of the property or prepayment at any time without penalty.

Slide 125: How Do Reverse Mortgages Work?

I-Note: EXPLAIN the basics of reverse mortgages by drawing comparisons to conventional mortgages.

Slide 126: Negative Amortization

Slide 127: Borrower’s Obligations

I-Note: EMPHASIZE the borrower’s obligations.


102

FHA Leading Provider

FHA insures about 90 percent of reverse mortgages through its Home Equity

Conversion Mortgage (HECM) program42. It sets standards and policies for the

loans, collects data on trends, and monitors lenders. There are some lenders

that offer non-FHA insured reverse mortgages with higher payouts.

FIGURE 7.1: REVERSE MORTGAGE TRENDS

*Annual totals are compiled at the end of the fiscal year.

Source: HUD statistics, National Reverse Mortgage

Lenders Association, www.nrmlaonline.org

TYPES OF HECMS

HECM for Refinance

The technical term for the HECM. The mortgage enhances quality of life by

increasing cash flow. Payout can be monthly, as needed, lump sum, or a

combination of methods.

HECM for Purchase

The HECM for purchase provides a lump sum for the purchase of a home.

Buyers usually need to make a substantial down payment.

42 Because FHA insures the majority of reverse mortgages, lenders may use the terms HECM and reverse mortgage interchangeably.

42

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Slide 128: FHA Leading Provider

I-Note: OBSERVE that FHA dominates the reverse market and sets standards, therefore the chapter will focus on HECMs. COMMENT on HECM trends.

I-Note: INFORM students that focus of the content will be on HECMs. PRESENT types of HECM loans and COMPARE fixed and adjustable rate loans.

Slide 129: Types of HECMs

HECM applications peaked in 2009 at

more than 100,000 mortgages.

http://www.nrmlaonline.org/


103

HECM Line of Credit

A reverse mortgage line of credit allows the borrower to draw funds as

needed from the equity in the home. The line of credit maintains a growth

rate that allows the borrower to tap into more equity without needing to

refinance; the amount gained through the growth rate is nontaxable

income. If there is a mortgage balance on a property, however, the

remaining mortgage balance must be paid off before the reverse mortgage

takes effect.

Fixed or Adjustable Rate?

The HECM borrower may choose a fixed or adjustable-rate loan. The cost of the

mortgage and availability of funds for a line of credit should be compared to a

lump sum with a fixed rate to determine which will be most cost effective for

achieving a specific goal. HECM counselors can provide printouts, called total

annual loan costs (TALCs), showing annual and total costs and payouts for all

options.

As a loan product, the fixed-rate HECM offers a predictable interest rate. HECMs

for purchase (H4P) are fixed loans that require the borrower to take all funds at

closing. H4P loans are usually fixed rate but can be adjustable rate, as well;

some borrowers may have the finances to take this option and obtain a line of

credit for their new home. Depending on state and program guidelines, a lump

sum payout could disqualify the borrower for public benefits, such as Medicaid.

It is always recommended that the borrower consult a professional such as a

financial advisor, CPA, or elder law attorney before selecting this option.

The interest rate of an adjustable-rate HECM will determine whether the total

loan amount will offer more, the same, or less than a fixed-rate loan. Keep in

mind that with adjustable-rate HECMs, the interest rate can increase. The rate

cap limit increases annually, as well as over the life of the loan. HECM

adjustable-rate loans can have various payout options, such as a lump sum,

monthly or annual withdrawal, or a combination of these.

HECM ELIGIBILITY Borrower eligibility criteria:

Youngest borrower must be at least age 62.

Own the property outright or have paid down a considerable amount.

Occupy the property as a principal residence.

Not be delinquent on any federal debt.

Slide 130 Fixed or Adjustable Rate?

I-Note: COMPARE fixed and adjustable rate HECMs.

Slide 131: HECM Eligibility

I-Note: LIST eligibility criteria borrowers and properties.

Exam Question 28


104

Have financial resources—residual income—to continue to make timely

payment of ongoing property charges such as property taxes, insurance and

HOA fees, and so on.

Participate in a counseling session with a HUD-certified HECM counselor.

Eligible properties:

Single-family homes

FHA-approved condos and co-ops

Manufactured homes built after 1976 and installed on a permanent

foundation

Two to four-unit homes with one owner-occupied unit

COUNSELING—THE IMPORTANT FIRST STEP Counseling is the first step in the HECM application process. Don’t

underestimate the importance of the counseling session. It must be completed

before going forward with the application process. The certificate provided by

the counselor becomes part of the application file. The session can take place

over the phone, in the counselor’s office, or the home. Anyone who will be

involved in the decision making, such as other family members or an attorney,

can participate in the counseling session. The lender, however, cannot schedule

or participate in the counseling session.

The counselor is responsible for:

Helping the client understand the appropriateness of a reverse mortgage to

meet the needs as well as alternatives.

Explaining the features of the reverse mortgage and its impact on the client

and heirs.

Discussing financial and other needs for remaining in the home, if that is the

client’s goal.

Confirming the client’s comprehension of the reverse mortgage by asking

specific questions.

Counselors may charge a fee, up to $125, but they must inform the client in

advance. Some nonprofit agencies provide the counseling at a reduced rate or

no charge, based on the ability to pay; they cannot refuse because of inability to

pay. The fee can be paid out of pocket or out of the loan proceeds.

Slide 132: Counseling—The Important First Step

I-Note: EMPHASIZE the importance and objectives of the counseling session. INFORM students how to find and contact a counselor. EXPLAIN the process.

Slide 133: Counselor’s Responsibilities


105

Six-Step Counseling Process

HUD requires HECM counselors to follow a specific protocol when conducting

the counseling session, send a required information packet before the session,

and follow up to confirm understanding.

1. Schedule an appointment. It’s okay to shop around for a counselor; some are booked 2–3 weeks in advance but others may have immediate availability.

2. Counselor contacts the client and sends an information packet. The client can ask for sample loan printouts to review in advance.

3. Counselor collects information from the client.

4. Counseling session. It’s a good idea to prepare a list of questions to ask during the session. Counselors must discuss other options such as refinancing an existing mortgage or moving to an assisted-living residence.

5. Certificate of HECM Counseling. When the counseling session is complete, the counselor provides a certificate attesting to completion of the counseling session. This certificate becomes part of the application file.

6. Follow-up.

Find HUD certified counselors at

https://entp.hud.gov/idapp/html/hecm_agency_look.cfm.

Slide 134: Six-Step Counseling Process

https://entp.hud.gov/idapp/html/hecm_agency_look.cfm


106


107

HECM APPLICATION PROCESS Except for counseling, the application steps are similar to a forward mortgage. A

title search, appraisal, and inspections are ordered at the time of application.

For a refinance, defects in the home must be repaired and can be paid for with

loan proceeds; for a purchase, the seller must make the repairs.

The underwriter reviews the documentation and confirms that all conditions

relating to additional or missing items are satisfied prior to closing. Once all

conditions are met, the closing date can be set. The total length of time for the

application process will vary by lender and depends on the conditions of the

approval as well as how long the borrower takes to satisfy the conditions.

Financial Assessment

HECM borrowers must complete a financial assessment. In the past, HECM

qualification focused on the condition of the property and the life expectancy of

the borrowers. Under current rules, borrowers must demonstrate the financial

capacity and willingness to make the payments required for property taxes,

property and flood insurance, and mandatory property obligations, as well as

maintain the property in good repair.

The financial assessment includes evaluation of credit history including:

Cash flow residual income to pay obligations and living expenses.

Credit, income, assets, and property charges.

History of timely payments and maintenance of property insurance and

property taxes. (HOA fees, if applicable).

Extenuating circumstances and compensating factors, such as the potential

positive impact of the HECM on the borrower’s financial capacity.

Note: A Non-Borrowing Spouse (NBS) is not considered unless he or she is a

co-signor on the account. The debts of the NBS will be included in the

residual income test for the borrower in community property states.

The borrower does not have to meet qualifying ratios for loan-to-value and

debt-to-income as for a regular (forward) mortgage.

Required Set-Asides

If the financial assessment raises doubts about the borrower’s ability to comply

with mortgage terms, the lender may set aside funds to pay property taxes,

insurances, mandatory property obligations, and repairs identified during the

appraisal. The funds may be withheld from a lump sum payment as a life-

Slide 135: HECM Application Process

I-Note: DESCRIBE steps in the HECM application process.

Slide 136: Financial Assessment

Exam Question 29

Slide 137: Required Set Asides


108

expectancy set-aside, based on the youngest borrower’s age, or withheld from

monthly payouts.

If the life-expectancy set aside is exhausted, the borrower must continue to pay

obligations from whatever funds are available. Even if it is not required, a

borrower may voluntarily establish a set-aside fund so that the lender can pay

property charges from a line of credit or monthly withholding.

PRINCIPAL LIMITS AND COSTS Calculation of the amount of principal available is basically a function of the life

expectancy of the borrowers, home equity, and property value. The due-and-

payable clause of HECM loans can be deferred for a non-borrowing spouse who

wants to remain in the home. Consequently, the principle available is

determined by the age of the youngest spouse regardless of whether they are a

mortgagor of record or not.

Payout Limits

Lump-sum payouts are capped at the greater of 60 percent of the principal limit

or the sum of monthly property obligations plus 10 percent of the principal

limit. Monthly payouts (term, tenure, and modified term and tenure) and line-

of-credit disbursements during the first 12 months cannot exceed the greater of

60 percent of the principal limit or the sum of monthly property obligations,

plus 10 percent of the principal limit.

Mortgage Insurance Premiums

The initial premium is 2 percent and the annual premium equals 0.5 percent of

the outstanding mortgage balance. The mortgage insurance premium may be

financed as part of the loan.

Other Fees and Costs

The origination fee, which compensates the lender for processing the loan, is

the greater of $2,500 or 2 percent of the maximum claim amount (MCA) for

properties valued at up to $200,000, plus an additional 1 percent for properties

valued at more than $200,000. For example, if the MCA is $300,000, the

origination fee would be $5,000; 2 percent of the first $200,000 plus 1 percent

of $100,000. The maximum origination fee is $6,000.

Closing costs from third parties can include an appraisal, title search and

insurance, surveys, inspections, recording fees, mortgage taxes, credit checks

and other fees.

I-Note: ADVISE students of the current maximum loan limit. CHECK maximum loan limits at HUD’s HECM webpage. Loan limits are adjusted annually. Go to www.hud.gov/program_offices/housing/sfh/hecm/hecmabou.

Slide 138: Principal Limits

Slide 139: Mortgage Insurance and Costs


109

Lenders may charge a monthly servicing fee of no more than $30–$35 deducted

from available funds and added to the loan balance. Lenders have the option to

include the servicing fee in the mortgage interest rate.

Total Annual Loan Cost

The total annual loan cost (TALC) statement shows the complete loan cost over

a period of time. Unlike an annual percentage rate (APR) disclosure, the TALC

factors in time and value appreciation. The longer a borrower lives and the

lower the appreciation rate, the more likely the balance will surpass the value of

the home, which results in a bargain for the borrower. However, if appreciation

is high and the borrower lives in the residence for a short time the true cost of

the loan can be high.

A homeowner can ask the HECM counselor or lender for TALC rate comparisons

for various stages of the loan, rates, and loan types. This request should precede

the loan application. The comparison page, TALC, and amortization schedule are

supplied again at application. Two limitations on the usefulness of a TALC are

that it does not take into consideration the added value in a growing line of

credit and calculations are based on the life expectancy of one homeowner.

Slide 140: Total Annual Loan Cost

I-Note: EXPLAIN the use of the TALC. CALL attention to the HECM fact sheets on the following pages. NOTE that the fact sheet summarizes important points.


110

HECM FACT SHEET

Eligible Borrowers Eligible Properties


Own the property outright or have paid down

a considerable amount.



Have financial resources to continue to make

timely payment of ongoing property charges

such as property taxes, insurance and HOA

fees, and so on.

Participate in a consumer information session

given by a HUD-approved HECM counselor.

Single-family homes


Manufactured homes built after 1976 and

installed on a permanent foundation

Two- to four-unit homes with one owner-

occupied unit


Complete counseling

Complete a financial assessment

Maintain the home in good repair

Buy homeowner’s insurance

Pay property taxes and mandatory obligations

(may be set aside and paid by the lender)

Payout Limits Four factors determine amount available:

Age of youngest borrower or nonborrower

spouse

Appraised value or sales price

Interest rates

Maximum claim amount

Pay out Limit: the greater of

60% of principal limit

Sum of monthly property obligations plus 10%


Credit history

Cash flow residual income

Credit, income, assets, property charges

History of timely payments and maintenance

of property insurance

Extenuating circumstances and compensating

factors

Payout Options All require at least one borrower to occupy the home as a principal residence.

Tenure Equal monthly payments as long as one borrower is living

Term Equal monthly payments for a fixed number of months

Line of Credit Unscheduled payments as needed until the line of credit is exhausted

Modified Tenure Combination of line of credit and scheduled payments

Modified Term Combination of line of credit and monthly payments for a fixed number of

months

Single payout Lump-sum disbursement at closing


111

Set-Aside Options (required or voluntary)

Life-expectancy set-aside, withheld from lump-sum payout

Monthly withholding from tenure or term payments, or line of credit

Lender may set aside funds to pay property taxes, property insurance premiums, mandatory property

charges, and repairs identified during appraisal

Interest Rates

Fixed Rate: same interest rate for the life of the loan

Adjustable Rate: interest rate adjusts annually or monthly; maximum 2% annual adjustment and 5%

over life of loan; no cap on monthly adjustable rate. Rate based on T-Bill or LIBOR rate, plus lender’s

margin.

Upfront Costs

Counseling $125 HUD recommended fee, some services offer free counseling

Origination Fee $2,500 minimum, $6,000 maximum

Greater of $2,500 or 2% of MCA up $200,000

Plus 1% of MCA over $200,000

Mortgage Insurance 2% initial premium

.05 annual premium

Closing Costs Usual costs associated with obtaining a mortgage, such as appraisal, title

search, inspections, recording fees, and state and municipal fees; can be

financed as part of loan.

Monthly Fees Service Fee $30–$35 (some lenders waive the fee)

Taxes Real estate taxes may be set aside and paid by lender.

When Does the Loan End? Move/Absence The borrowers move to another residence, or the last borrower no longer lives

in the home as a primary residence for a period of 12 consecutive months.

Short-term stays in a hospital or second home do not disqualify the property.

Sale The property is sold.

Death The last borrower or nonborrower spouse residing in the home passes away.

Neglect The homeowner does not pay real estate taxes or insurance or keep the

property in good repair.


112

REVERSE MORTGAGE ALTERNATIVES

A reverse mortgage should be compared to selling the home and using the

proceeds to rent or buy a new home, refinancing, or a home equity line of credit.

Factors to consider when comparing a sale with a reverse mortgage include:

Quality of life

Net sale proceeds

Cost to buy or rent a new home or reside in a congregate or assisted-living

community

Availability of alternative income-producing investments, potential earnings,

and ability to manage the investments

Availability of community-based support services and public benefits

REVERSE MORTGAGE BENEFITS

Tapping built-up equity

The main benefit of a reverse mortgage is allowing a homeowner to tap the

built-up equity in the home by receiving immediate cash, lifetime payments,

or a line of credit.

Lifetime income

Tenure payments provide a monthly income that will continue even if the

homeowner outlives the actuarial life-expectancy tables. Homeowners can

live in the comfort and privacy of their own homes and with the security of

stable income.

Nonrecourse financing

Neither the homeowner nor the heirs will ever owe more than the home is

worth, even if the home value declines or payouts exceed the value. The

lender cannot seek other assets to make up for a shortfall. If the homeowner

or heirs sell the property and the proceeds fall short, the remaining mortgage

balance is excused. Mortgage insurance compensates the lender for a

shortfall.

Tax-free payouts

Money borrowed through a reverse mortgage is not taxable income. Any

interest expense accrued by the borrower on a reverse mortgage is not

deductible until the interest is actually paid, which is usually when the

mortgage is paid off.

Asset preservation

It may be better to tap home equity than to spend down other assets.

Slide 141: Reverse Mortgage Alternatives

I-Note: DISCUSS reverse mortgage alternatives.

Slide 142: Reverse Mortgage Benefits

I-Note: PRESENT benefits of reverse mortgages.


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WHEN IS A REVERSE MORTGAGE NOT A GOOD IDEA?

High-risk, low-return investments

A reverse mortgage is discouraged when the proceeds are intended for a

high-risk investment or one with a lower rate of return than that paid on the

line of credit. The investment rate of return should exceed the growth rate

on the line of credit.

Annuity purchase

Using the loan proceeds to purchase an annuity is generally not allowed.

Low equity or property value

When a homeowner does not have much equity in the property—less than

40 percent—or the property value is low, the amount available through a

HECM will likely be insufficient to offset the costs. However, even under

these circumstances a HECM may be the best course of action if the payout

meets financial needs.

Short-term, small financial needs, no compelling need

HECM costs outweigh the benefits if the borrower’s needs are short term or

modest. It is usually not the best choice for someone who will likely need

nursing home care in the near future. Obviously, the HECM is not meant for

flipping properties. As we have seen, the costs associated with reverse

mortgages are high. Lacking a compelling need to draw out the equity, the

homeowner should probably not consider a HECM as an option.

Paying for nursing home care, buying into a continuing care community,

buying new homes not ready for occupancy

Because of the residency requirement, a reverse mortgage cannot be used

to buy into a CCRC or pay for a nursing home stay of more than 12 months,

unless, for example, one spouse continues to live in the home. Payout from

a reverse mortgage could, however, be used to pay for long-term care

insurance, which would cover a future nursing home stay. Newly

constructed homes are eligible if occupied within 60 days.

Mortgage default

If the borrower is in mortgage default the HECM can, potentially, be used to

save the home. In order for this option to be available to the borrower, the

other outstanding FHA loan must be paid off through the HECM.

Slide 143: When Is a Reverse Mortgage Not a Good Idea?

I-Note: DESCRIBE situations in which a reverse mortgage is not a good course of action.

Exam Question 30


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WHO OWNS THE PROPERTY? The first step in qualifying for a reverse mortgage involves a look at who owns

the property—the names on the title. Remember that qualifying for a reverse

mortgage requires the youngest borrower to be at least 62 years old. Note that

a child or grandchild whose name has been added to the title can disqualify the

borrower.

WHAT HAPPENS TO THE NON-BORROWING SPOUSE IF THE BORROWER DIES? If the borrower passes away and the HECM was issued on or after August 4,

2014, the eligible non-borrowing spouse (NBS) may remain in the home. The

loan repayment is deferred if the following conditions are met:

At the time of the loan closing, the NBS is married to the borrower and

remains married for the rest of the borrower's lifetime or until the loan is

satisfied.

The spousal status of the borrower and NBS is disclosed at the time of the

loan application and closing.

The NBS is specifically named as such in the mortgage documents.

The property is the NBS's principal residence.

The NBS establishes legal ownership (or other ongoing legal right) to remain

in the property within 90 days of the death of the borrower.

The NBS continues to meet all loan obligations.

WHAT DO HEIRS RECEIVE? When the last surviving homeowner passes away, the remaining equity in the

property goes to the heirs, not the bank. Heirs have a choice to sell (must be an

arm’s-length sale) the house to pay off the debt, pay off the debt from another

source, or obtain a new forward mortgage on the home. Obviously, the heirs

must meet mortgage underwriting criteria for a forward mortgage. If the

property is sold by heirs, the sale price must be at least at least 95 percent of

the appraised value.

If the amount owed is more than market value, the heirs or the owner may let

the house go to the lender through transfer or foreclosure. Because a reverse

mortgage is a nonrecourse loan neither the heirs nor the estate must satisfy the

overage. That will be met through the mortgage insurance.

Slide 144: Who Owns the Property?

I-Note: OBSERVE that co-ownership of the property with a child or grandchild can disqualify the property.

Slide 145: If the Borrowing Spouse Dies

I-Note: DESCRIBE the conditions and obligations of a non-borrowing spouse who wishes to remain in the home.

Slide 146: What Do Heirs Receive?

I-Note: EXPLAIN courses of action for the heirs.


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If there are no heirs, the bank may take possession of the home and sell it. The

estate may retain ownership of the property, but it must pay off the loan.

Spending down the equity in the home, however, reduces the value for estate

tax purposes.

MORE FAQS ABOUT REVERSE MORTGAGES Why are insurance premiums so high for a reverse mortgage?

With a reverse mortgage, the lender assumes all the risk. The insurance

guarantees that the borrower will receive the expected payouts by offsetting

the risk that the borrower will outlive the equity in the home. It also protects

the lender from a shortfall in the sale proceeds or a new forward mortgage

because of value decline. If the sale proceeds fall short of the loan balance, the

insurance guarantees that the homeowner, the estate, and the heirs will not

owe more than the value of the home. Like any other FHA-insured loan, the sale

must be arm’s-length and the property cannot be sold to a relative in order to

excuse the remaining balance.

What if a buyer needs more cash to complete the transaction?

Others can provide the cash to complete the transaction, but it must be

available at least 60 days in advance. The borrower must present proof of

the availability and source of the funds such as a letter of deposit, proof of

liquidation of other assets, deed of sale, or a closing disclosure.

What if there is a mortgage balance on the home?

A reverse mortgage requires the property to be owned debt free. The

potential borrower is not permitted to have a mortgage payment and a

reverse mortgage.

Is a reverse mortgage an alternative to a short sale?

Yes and no. FHA guidelines set lending limits as the lesser of the sales price,

appraised value, or the FHA limit. If the home value has dropped, thus

reducing equity, the lender still must be willing to compromise and reduce

the mortgage balance. Assuming an adequate amount of equity remains,

the mortgage balance can be paid off with a reverse mortgage.

Depending on the HECM lender, they may be able to negotiate on behalf of

the borrower. For example, the nation’s top reverse mortgage lender,

American Advisors Group (AAG), has a short-sale payoff department that

negotiates payoff amounts.

Can a reverse mortgage stop a foreclosure?

Yes, but action must be quick. If the homeowner meets other qualifications,

a reverse mortgage can stop monthly mortgage payments and prevent a

foreclosure.

Slide 148: More FAQs about Reverse Mortgages

I-Note: PRESENT the FAQs about reverse mortgages. SUPPLEMENT the list if appropriate.


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How is a reverse mortgage line of credit different from a regular home

equity loan? The borrower pays interest only on the amount withdrawn and the

remaining line of credit grows at the same rate as withdrawals so that the amount of available credit increases.

The HECM line of credit does not require repayment until the borrower sells, vacates the home, or passes away.

The amount available cannot be frozen.

A negative-equity situation cannot occur. The borrower, or heirs, will never owe more than the property is worth.

What is the impact on Social Security, SSI, Medicare, and Medicaid?

Payout from a reverse mortgage doesn’t impact Social Security or Medicare

benefits. But a recipient of a need-based program, like Medicaid and

Supplemental Security Income (SSI), must be careful that the payout does

not exceed liquid-asset limits Reverse mortgage payouts can impact

Medicaid eligibility even though home equity is not a countable asset. An

estate recovery or TEFRA lien placed on a reverse-mortgaged property will

prevent an heir from selling the home without first reimbursing Medicaid.

Clients should be advised to consult with the local public benefits office or

attorney for information and clarification before taking any action. You, as a

real estate professional, should never be in the position to have to provide

this advice to your client.


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SCENARIOS

It’s Time to Move—How a Reverse Mortgage Made It Happen

Lois McGrady, age 80, is in fairly good health except for

her eyesight which has become progressively weaker

over the last couple of years. Since her husband passed

away she is increasingly confined to her home. Lois still

lives in the bungalow home she and her husband

bought when their daughter, now the mother of

teenagers, was a toddler. The neighborhood isn’t as

safe as it used to be, and Lois would like to move into a

seniors-only condo development close to her

daughter’s home. Lois accepted an offer of $174,000

for her bungalow, but condos in the senior

development start at $215,000. The sale proceeds won’t be enough to afford

the higher-priced condo. From the bungalow home sale proceeds, Lois makes a

required down payment of $85,000 and pays reverse mortgage closing costs of

$2,750. The reverse mortgage provides $130,000 to complete the purchase of

the condo. After the transaction, she has a nest egg of $86,250 to cover the

monthly condo assessment and other expenses.

I-Note: DISCUSS the examples of reverse mortgage uses for various objectives. OPTIONAL EXERCISE: DIVIDE the class into five groups and assign one scenario to each group. INSTRUCT the groups to identify the scenario’s issues, discuss the pros and cons of a reverse mortgage, and suggest an alternative. ALLOW 10–15 minutes for the groups to complete the assignment. CALL on each group to present a brief (2–3 minute) summary of their discussion and INVITE other students to comment. USE a timer to ENFORCE time limits for presentations and comments.


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Buying a Second Home

Dorothy and Brad Lennell are active retirees.

Dorothy just celebrated her 65th birthday and

retirement. Brad, age 70, retired three years ago.

Now that Dorothy has retired they are looking

forward to spending winters in a warmer climate.

With many of their friends purchasing properties

in Florida, they want to take advantage of the

opportunity to buy a second home close to their

friends, but still have room for their children and

grandchildren to come for visits. Brad nurtures a

dream of traveling around the country in an RV

while they are both in good health. They both

have good pensions and income from 401(k) plans but would rather use the

equity in their current home, valued at $532,000 with no mortgage, instead of

dipping into their savings. Based on Dorothy’s age, they qualify for an

adjustable-rate reverse mortgage line of credit of $285,950. In the first year,

they use $190,000 toward purchase of a three-bedroom condo in Fort Myers,

Florida. The remaining $95,950 line of credit is available for future expenses and

maybe for leasing an RV.


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Stopping Mortgage Payments, Preventing Foreclosure

Henry Liang’s children finally convinced him to retire

at age 70. Henry and May, his wife, purchased their

current ranch-style home 15 years ago. May, who

passed away a year ago, was in the early stages of

multiple sclerosis when they purchased the home,

and they needed a one-level home. Henry’s delayed

retirement increased his Social Security benefit, but

the printing company where he worked for 30 years

is going bankrupt and the pension he counted on

may be lost or greatly reduced. He still owes

$125,000 on the mortgage on his home, and the

monthly payment is $1,594; the appraised value is

$358,000. Henry wants to continue living in his home, but if his pension is lost it

will be a real stretch to continue the mortgage payments. His children are

dealing with job layoffs too, and his daughter recently asked if she and her

husband could move in. Henry qualifies for an adjustable-rate reverse mortgage

that will pay off the mortgage balance on his home and provide a first-year

$21,000 line of credit and $58,500 after the first year. Henry will be free of the

burden of future mortgage payments. He can also afford the estimated cost of

$10,000 to enclose a porch in order to increase the amount of living space.


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Buying a New Home

Ruth Sorenson and Lillian Adams have

been co-owners of a successful art

gallery and life partners for more than

20 years. At ages 64 and 68, they are

ready to move out of the city and retire

from high-stress business ownership.

While operating their business, they

lived in a rented loft apartment above

the gallery. In their retirement years,

they want the privacy and security of

owning a home. Ruth and Lillian plan to relocate to a nearby small town with a

budding artists’ colony and open a weekends-only gallery. The sale of their

business netted $165,000. They found the perfect home priced at $181,000 and

in good repair, but in need of updating. Based on their ages and the value of the

home, they qualified for a fixed-rate reverse mortgage of $95,358 after closing

costs. After making the required down payment of $85,642 from the sale

proceeds of their business, they have $79,358 remaining to pay for updating the

kitchen and bathroom and starting a new business. They own their first home

and have no mortgage payments.


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Supplementing Income

Virginia Dwyer, age 79 and widowed, was always on

the go before rheumatoid arthritis affected her

mobility and ability to drive. She would like to stay

in her home but has trouble keeping house and

preparing meals. Her two sons live nearby but have

young families and demanding careers; they can’t

provide day-to-day assistance. Virginia values her

independence and the serenity of her home. If she

moved into either son’s home, she would be living

under the same roof with teenagers. Homemaker

assistance for a couple of hours a day—for meals,

grocery shopping, errands, light housekeeping, and

trips to the doctor—would provide enough support for her to remain safely at

home, but it will cost almost $1,200 a month. Virginia’s income decreased when

her husband passed away and now, with the expense of costly medications for

her arthritis, it will be difficult to afford the help she needs to stay in her home.

Her home is valued at $510,000, which qualifies her for an adjustable-rate

reverse mortgage line of credit up to $300,472. She can withdraw up to

$172,480 in the first year. Virginia can draw on the equity in her home to pay for

homemaker assistance and prescription medicines as well as other expenses.


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FAMILY ISSUES

The circumstances, needs, wishes, and quality of life of the elder family member

should be the decisive factors in obtaining a reverse mortgage. When family

members and heirs can be part of the decision-making process, they have an

opportunity to work through the practical and emotional issues and participate

in making the best choice for the family dynamic. Although heirs are not

responsible for the debt accrued on the home, they do need to understand fully

the mechanics of the reverse mortgage and their options when the loan comes

due. Although they receive the remaining equity, if any, heirs must pay off the

loan with other assets, sell, or refinance with a new forward mortgage. If heirs

want to keep the property but can’t pay off a loan or qualify for a mortgage,

they may feel unfairly deprived of an expected inheritance.

Family members can, and should, participate in the counseling session. The

HECM counselor is required to document the names and relationships of

everyone participating in the counseling session. A person holding a durable

power of attorney, a life trust, or appointed conservator is eligible to obtain the

loan on behalf of the homeowner; proof of these authorizations must be

provided to the counselor.

Almost every real estate professional has encountered a situation in which adult

children have ulterior motives, but most family members have their elderly

relatives’ best interests at heart; they want them to live comfortably in a safe,

suitable home and enjoy a good quality of life. Real estate professionals should

never try to take the place of a lender or HECM counselor, but they can make

families aware of reverse mortgage possibilities and help them work through

the issues to see what is best for the relative and the family.

OPPORTUNITIES FOR THE REAL ESTATE PROFESSIONAL Reverse mortgages create transactions when clients use the mortgage to

purchase property. And there is the potential for two transactions when clients

sell a home and buy another using the reverse mortgage for the purchase.

As the preceding scenarios demonstrate, the reverse mortgage opens

possibilities for homeowners who cannot make a move because of low income.

For homeowners whose homes lost value in recent years, the reverse mortgage

may help them realize, and accept, that home values may never return to hot-

market prices but that there are viable options. Homeowners waiting to get the

right price may be motivated to go ahead with planned moves if they do not

have to rely on sale proceeds.

I-Note: DESCRIBE family issues. COMMENT that most families want to do what is best for the elderly relative. NOTE that family members and others can participate in the counseling session.

Slide 149: Family Issues

Slide 150: Opportunities for the Real Estate Professional


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Real estate professionals should involve all concerned family members in

discussions regarding reverse mortgages. Always be cognizant of the needs of

the homeowner and act in the manner that best serves them. Take time to

explain to the homeowner, as well as involved family members, how a reverse

mortgage may be in their best interest. If mishandled, however, suggesting a

reverse mortgage may create false expectations and cause hard feelings

between you, the homeowner, and other family members. Remember, for

many members of the mature generations, the home is an anchor that should

never be risked. For baby boomers, on the other hand, the home may be viewed

as a financial asset and source of funding for lifestyle choices as well as

supplementing retirement income.

SELLING OR BUYING A REVERSE MORTGAGED HOME What are your responsibilities as a listing agent if you determine that the seller

has taken a reverse mortgage on the home? As the listing agent, you should ask

to see the most recent mortgage statement from the seller or their heirs to

learn the approximate payoff amount. With reverse mortgages, there are two

liens on the property for more than it is worth. One lien is from the lending

institution that holds the reverse mortgage and the other lien from HUD since it

is a government-insured loan. If there is still equity in the house, the owner or

heirs may want to sell it and pay off the mortgage and keep whatever equity

they are due after the sale of the house. The sales price must be at least 95

percent of the appraised value.

As a buyer's agent, if you see two high liens and one of them is HUD, ask the

listing agent if they have confirmed the balance owed. You want to be sure the

balance owed doesn't exceed the value and that the house can be sold to your

buyer client.

I-Note: LEAD a discussion of opportunities for real estate professionals to increase the number of transactions. PROVIDE guidance on selling or buying a reverse mortgaged home.

Slide 151: Selling or Buying a Reverse Mortgage Home

Exam Question 31


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126


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In this chapter, we’ll look at some tax issues of particular concern for age 50+

homeowners and retirees. Real estate professionals don’t need to memorize all

the details of the following tax issues, but they should be aware of the concepts

and ramifications for real property ownership and transfer. When issues and

concerns arise, the real estate professional should advise clients to seek the

advice of appropriate experts.

DECLARING A PRINCIPAL RESIDENCE Tax considerations can impact retirees’ choices of where to live. A state that has

low or no personal income tax or sales tax or low real estate tax rates provides

an advantage for retirees living on fixed incomes. For those who maintain a

home in more than one state, the issue of declaring a primary residence can

significantly impact income and real estate tax as well as even how property is

divided among heirs. For example, many states provide a homestead exemption

that offers some tax relief for seniors who are residents of the state.

Note: The IRS states that a taxpayer can have only one primary residence at a time.

How can homeowners with residences in more than one state prove which

residence is their principal residence? Proofs of residency include:

An affidavit declaring residency

Voter registration

Documented length of time spent in the residence

A bank account

Church or temple membership

Driver’s license

Utility bills

Mailing address on a tax return

Reference to the domicile/principal residence in a will

Real estate professionals should know about available tax breaks, such as exemptions or postponement of tax payments for retirees and older homeowners. For example, some states offer a property tax deferral or freeze so that elderly homeowners are not taxed out of their homes; the state may recover deferred taxes through a property lien due on sale or death of the homeowner or surviving spouse.

Slide 153:–Slide 154: Declaring a Principal Residence

I-Note: DESCRIBE the reasons for and impact of declaring a domicile. INFORM students of state/local tax breaks for seniors.

Slide 155: What You Need to Know


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Mortgage Interest Deduction43

‘The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018

until 2026 the deduction for interest paid on home equity loans and lines of

credit, unless they are used to buy, build or substantially improve the

taxpayer’s home that secures the loan.

Under the new law, for example, interest on a home equity loan used to build

an addition to an existing home is typically deductible, while interest on the

same loan used to pay personal living expenses, such as credit card debts, is

not. As under prior law, the loan must be secured by the taxpayer’s main

home or second home (known as a qualified residence), not exceed the cost

of the home and meet other requirements.

For anyone considering taking out a mortgage, the new law imposes a lower

dollar limit on mortgages qualifying for the home mortgage interest

deduction. Beginning in 2018, taxpayers may only deduct interest on

$750,000 of qualified residence loans. The limit is $375,000 for a married

taxpayer filing a separate return. These are down from the prior limits of $1

million, or $500,000 for a married taxpayer filing a separate return. The limits

apply to the combined amount of loans used to buy, build or substantially

improve the taxpayer’s main home and second home.

UNDERSTANDING CAPITAL GAINS TAX Capital gains tax is an important consideration for all real estate owners—

homeowners, investors, and second-home owners. In real estate, a capital gain

is the difference between the adjusted basis (usually the amount paid for the

property plus improvements and transaction costs) and the current sales price.

Adjusted basis is the starting point for determining gain or loss. The basis of a

property may be its purchase price, fair market value at a specified date, or a

substitute basis. Capital improvements and transaction costs increase basis;

depreciation (on investment and income property) reduces it. The lower the

adjusted basis, the higher the gain, and, conversely, the higher the basis, the

smaller the tax implications. To reduce or minimize the capital gains tax

purposes, a high adjusted basis is best.

Depreciation, or cost recovery, allows a yearly tax deduction of a portion of the

value of the property but reduces the owner’s adjusted basis in the property.

When a depreciated property is sold or exchanged, the cost recovery

deductions taken over the years are recovered, or recaptured, and may be

taxed as a capital gain at a tax rate of up to 25 percent. Property that may be

43 IRS, IR-2018-32, Feb. 21, 2018, www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law.

Slide 156: Mortgage Interest Deduction

Slide 157–Slide 158: Understanding Capital Gains Tax

I-Note: EXPLAIN the basics of capital gains tax and PROVIDE information on current rates and tax brackets. STATE that capital gains tax is an issue for all real estate owners. ADMONISH students to refer clients to a tax advisor for expert advice on these issues.


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depreciated is sometimes called 1250 property, referring to the specific section

of the IRS code. Buildings, structures, and improvements are depreciable; land is

not depreciable.

Long-term capital gains are value increases on assets owned for more than a

year; varying tax rates apply based on the owner’s tax bracket. Gains on

property owned for less than a year are taxed as ordinary income. Losses on the

sale of an investment property (not a primary residence) are generally fully

deductible and offset ordinary income.

Basis Step-Up for Heirs

Basis step-up is an important concept for transfer of property to heirs. The

estate is subject to tax based generally on the fair market value of the assets at

the time of death, not the deceased’s basis. But heirs receive the estate assets

with a stepped-up basis of fair market value at the date of the decedent’s death.

This means that if an heir sells an asset received from the estate before the

asset further appreciates in value, there is no capital gain tax due on the sale.

The stepped-up basis rule applies to real property included in the decedent’s

gross estate. In community property states, surviving spouses benefit from a

stepped-up basis for both the inherited and their own shares of community

property.

To prevent using this rule to circumvent the tax law by temporarily gifting the

property to someone who is very ill or elderly and having that person will it

back, the stepped-up basis rule does not apply to property acquired by the

decedent by gift within one year of the date of death when the heir is the

original donor or donor’s spouse. The decedent’s basis in the property carries

over to the heir.

CAPITAL GAINS TAX ON SALE OF PRINCIPAL RESIDENCES All real estate professionals should know the current rules regarding treatment

of capital gains on the sale or exchange of a principal residence. Despite a

generous tax exemption on the gain on the sale of a principal residence, capital

gains tax can be an issue. The basics are:

A capital gain of up to $250,000 single (S) or $500,000 married filing jointly

(MFJ) is exempt from tax if the property has been owned and used by the

taxpayer as a principal residence for at least two years out of the five years

prior to the sale.

The exemption does not require a minimum age or rollover to a higher-

valued property. It can be claimed repeatedly as long as residency

requirements are met.

I-Note: EXPLAIN the concept of basis step-up for heirs. NOTE that it essentially forgives capital gains tax on appreciated value.

Slide 159: Basis Step-Up for Heirs

Slide 160: Capital Gains Tax on Sale of Primary Residences

I-Note: REVIEW the basics of capital gains tax on the sale of a personal home. NOTE that losses on a personal residence are not deductible.


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A widowed homeowner can claim the full $500,000 (MFJ) exemption if the

sale occurs within two years of the death of the spouse and the surviving

spouse has not remarried.

Military and Foreign Service personnel on qualified active duty assignments

are allowed to suspend the five-year test period for up to 10 years.

If the homeowner must sell due to an illness or disability (their own or that

of a family member for whose care they are responsible), job relocation, or

specified unforeseen circumstances.44 a prorated portion of the gain is

excluded. For example, if a homeowner lived in a house as a principal

residence for one year before becoming disabled and forced to sell the

home in order to relocate to a care facility, the exemption would be

reduced by half; $125,000 for (S), $250,000 for (MFJ) of capital gain would

be exempt. A physician must certify the need for medical care.

Capital losses on the sale of a principal residence are not deductible.

A principal residence is not depreciable for tax purposes, unless a home

office is used.

CAPITAL GAINS TAX ON SALE OF CONVERTED SECOND HOMES After January 1, 2009, sales of properties used as second homes will always be a

taxable event. Before January 1, 2009, a second-home owner could convert the

property to a principal residence by living in it for two years and thus exclude

$250,000 (S) or $500,000 (MFJ) of taxable gain upon sale. A provision of the

2008 Housing and Economic Recovery Act made the sale of a principal residence

used as a second home (nonqualified use) for any time after January 1, 2009,

subject to capital gain tax regardless of how long the owner lives in the home. In

order to calculate the amount of taxable gain, it is important to understand the

concept of nonqualified use: It is any period of time the homeowner, spouse, or

former spouse did not use the residence as the principal residence.

Exceptions

Any time the residence was used or owned before January 1, 2009 does not

figure in the calculation. In other words, long-time owned second homes are

not as adversely impacted.

Any portion of the five-year period after the property is used as a principal

residence is not included. This alleviates a tax burden on homeowners who

44 Unforeseen circumstances include natural disasters, terrorism, job layoff, death, death of a spouse, divorce, separation, and multiple births.

I-Note: EXPLAIN the change in tax treatment for second homes converted to primary residences after January 1, 2009. OBSERVE that the full effect of this tax provision will likely become evident as the boomer generation retires and converts and sells vacation homes. REFER students to page 221 in the Resource Section for financing strategy for conversion of a second home to a primary residence.

Slide 161: Capital Gains Tax on Sale of Converted Second Homes


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move to a new home and have difficulty selling the previous principal

residence due to a slow market.

A temporary absence, up to two years, due to changes in employment,

health, or specified unforeseen circumstances.

Example

Cliff and Shirley Anderson purchased a vacation home in 1999 for $95,000 and

sold it in 2014 for $250,000. Although they used the vacation home as a

principal residence for the 2 years prior to the sale, a portion of the gain will be

taxable. Why?

The Andersons occasionally used the vacation home for 3 years (nonqualified

use) after January 01, 2009. In 2012, they sold their principal residence and

moved into their vacation home. The Andersons lived in their former vacation

home as a principal residence for two years before selling it in 2014 for

$250,000. Because 3 out of 5 years were nonqualified use, 60 percent of the

gain, $93,000, is taxable.

The Andersons owned the vacation home for 5 years after January 1, 2009

and sold it in 2014. Years of ownership before 2009 do not count.

During the 5-year period, they used the home for 3 years as a vacation

home (nonqualified use).

The taxable portion of the gain is calculated by multiplying the total gain by

the ratio of nonqualified use to the entire period of ownership after January

1, 2009:

gain x

nonqualified use after 1/1/09 = taxable gain

entire period of ownership after 1/1/09

$155,000 x 3 = $93,000 5

The amount of gain on the sale is $155,000, and the taxable portion is

$93,000 (60 percent).

If the Andersons had rented out the property in order to claim deductions

for depreciation, the sale would also be subject to cost recovery recapture

taxed at a maximum of 25 percent.

The longer the period of ownership in relation to use as a second home, the less

the percentage of taxable gain, but it will never be zero.

Slide 162: Calculation

I-Note: NOTE that the taxation of second homes is covered in depth in the Resort and Second-Home Property Specialist Certification Course. The issue is included here to raise students’ awareness.


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ESTATE TAX ISSUES Estate tax planning is an important issue for individuals with high net worth.

Real estate professionals do not need to be experts in estate tax matters, but

they should be aware of some the tax triggers so that they can advise clients

and customers to seek expert advice.

Federal estate tax is calculated on the basis of the total value of all a decedent’s

assets in excess of a specified level; the total value can be applied to the lifetime

exclusion amount of $11.18 million, as of 2018. The total value, or equity, of the

estate generally does not include certain assets such as life insurance proceeds

paid to another beneficiary or a home occupied by a surviving spouse.

Therefore, the equity of the estate may or may not subject the estate to federal

estate taxes depending on whether the equity of the estate exceeds the lifetime

exclusion amount. Transfers of property between spouses, known as the

marital deduction, are exempt even when one spouse passes away, except if the

surviving spouse is not a U.S. citizen. If the value of the estate exceeds the

lifetime exclusion, the excess amount is taxable. Under the current tax

structure, only a small percentage of estates actually pay estate tax but

compared to ordinary income and capital gains tax rates, the rates are quite

high.

Same-Sex Spouses

In August 2013, the IRS ruled that same-sex spouses who are legally married in a

jurisdiction that recognizes same-sex marriages are treated as married for all

federal tax purposes including estate tax. The ruling applies regardless of where

the couple lives. The ruling does not apply to domestic partnerships.

Life Partners and Non-U.S. Citizen Spouses

Unmarried life partners are not accorded the same federal estate tax benefits as

married couples. Non-U.S. citizen spouses, even if legal residents, are also at a

disadvantage for estate tax.

The IRS does not allow a marital deduction for property bequeathed to a non-

U.S. citizen spouse. They may receive annual gifts of up to $152,000 (effective in

2018) from their citizen spouses without tax implications. But all of a citizen

spouse’s assets are included in the gross estate, including the share of a jointly

owned principal residence. Estate value in excess of the amount offset by the

unified credit is taxable. The IRS rationalizes that a non-U.S. citizen surviving

spouse may circumvent future tax liabilities by leaving the U.S., transferring

assets out of the country, and renouncing residency.

Unmarried couples are not allowed to claim a marital deduction. They can make

annual gifts to each other up to $15,000, but they cannot take advantage of the

federal marital deduction for transfer of their estates.

Slide 163: Estate Tax Issues

I-Note: HIGHLIGHT estate basics including issues for same sex spouses, life partners, and non-U.S. citizen spouses.


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Financial planners may advise life partners and spouses of non-U.S. citizens who

own substantial assets to establish a trust, usually a qualified domestic trust

(QDOT), to receive estate assets and manage the potential tax burden.

If you are working with high-net-worth clients who are unmarried couples or

non-U.S. citizen spouses, a recommendation to consult with a financial planner

or tax advisor about estate tax issues may be much-appreciated advice.

GIFT AND GENERATION-SKIPPING TAX

Gifting assets to intended heirs during life, instead of as a bequest, moves assets

out of the gross estate. It also provides the givers the pleasure of making the gift

during their lifetime and assures that assets go to particular individuals. An

individual can make an annual gift to any other individual, free of gift taxes or

reporting, of up to $15,000 per recipient; each spouse can make gifts up to that

amount for a total of $30,000 in a year to any other person. When a gift exceeds

$15,000, the value of the gift is based on the fair market value as of the date of

the gift and not on the donor’s basis. This includes an interest in real property.

Gift tax is paid by the donor if the gift exceeds $15,000, but, in reality, very few

donors ever pay a gift tax. This is because as taxable gifts are made during the

donor’s life, although a gift tax return must be filed, no tax is payable out of

pocket until the cumulative amount of lifetime taxable gifts exceeds the

exclusion limit. Payment of medical expenses or college tuition is not subject to

gift tax if the payments are made directly to the institutions; these are known as

“direct transfers.” The top gift tax rate is 40 percent.

Note: A common misconception about gifts is that any gift over the exclusion

results in the payment of gift tax. This is simply not true in 99.9 percent of all

gifts because the gift value in excess of $15,000 is applied against the lifetime

exclusion amount, which is $11.18 million in 2018. The gift tax return Form 709

simply keeps track of the remaining lifetime exclusion amount.

A common occurrence is for a parent to make a gift of an interest in property to

a child or other beneficiary as a means of avoiding probate. Transferring a title

or adding an individual to the title of real estate can have gift tax consequences.

Adding an individual to the title of real estate and granting them a half

ownership and a survivorship interest will usually exceed the $15,000 annual

limit. Attorneys and tax advisors who are experts in estate planning should be

consulted.

Gifts and bequests from grandparents to grandchildren can trigger generation-

skipping transfer (GST) tax. Gifts and bequests made to heirs who are not direct

descendants, such as the children of a life partner, can also trigger GST tax of 40

percent if the recipient is 37.5 years younger than the donor. The unified credit

for gift and estate tax can be used for generation-skipping tax. If you are aware

Slide 164: Gift and Generation-Skipping Tax

I-Note: EXPLAIN the basics of generation skipping tax.

Payment of medical expenses or college

tuition is not subject to gift tax if the payments are made directly to the

institutions.


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that clients intend to bypass their adult children and give or bequeath high

value property to grandchildren, your recommendation to seek expert tax

guidance could be welcome advice.

CAN AN IRA OWN REAL ESTATE? A traditional IRA, Roth IRA, or SEP can own real estate in a self-directed account.

Eligible types of property are land, commercial property, rental condominiums

or residential property, trust deeds, and real estate contracts. The purchase

must involve an IRA custodian or trustee specializing in real estate. The

custodian or trustee actually makes the purchase on behalf of the account

owner and holds the title to property. There are some important limitations to

be aware of. An owner cannot have any personal use of the property, which

means that a personal residence or vacation home cannot be owned by an IRA.

Real estate that is already owned cannot be placed in the IRA. Property owned

by immediate family (spouse and children) cannot be purchased. All of the

property expenses, such as taxes, insurance, and repairs, must be paid from

funds in the IRA, which means liquid funds must be available in the account.

Income generated from the investment is deposited in the IRA; the IRA owns

the property, which can provide the liquid funds needed for expenses. Real

estate may be withdrawn from an IRA for use as a residence or vacation home

when the owner reaches age 59½; the IRA can sell the property or transfer the

title to the owner. Income tax will be due on the current value of the property if

it has been held in a traditional IRA; if the property was held in a Roth IRA, there

is no tax on the distribution. A client who is interested in purchasing real

property to hold in an IRA or SEP should seek out a specialist in real estate or

self-directed IRAs. An easier way is to invest in a real estate investment trust

(REIT), which is similar to a mutual fund.

TAX-DEFERRED 1031 EXCHANGES

Note: The place for the real estate professional in a 1031 exchange is to bring

the buyers and sellers to the closing table. The exchange, and all parties to the

exchange, should consult with both legal and tax advisors. While a qualified

intermediary (QI) or accommodator is not technically required by law, we

recommend that the client intending to complete an IRC 1031 exchange contact

such a professional.

Over the years of building careers and accumulating assets, many in the 50+ age

range acquire investment and commercial properties. When the time comes to

reconfigure a real estate investment portfolio or convert business property, the

tax-deferred 1031 exchange enables postponement of capital gains tax.

Federal tax law allows taxpayers to defer capital gains tax on the exchange of

property used in trade or business or held for investment. A 1031 exchange

postpones but does not eliminate taxes, although with the basis step-up that

Slide 165: Can an IRA Own Real Estate?

Exam Question 32

I-Note: EXPLAIN the concept of a 1031 exchange and basic property requirement. OBSERVE that the 1031 exchange may be an issue for owners of rental and investment real estate. REVIEW the goals that can be accomplished.

Slide 166: Tax-Deferred 1031 Exchanges


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occurs when a property is transferred to an heir, capital gains taxes are in

essence forgiven at that time. A real estate professional should be able to

recognize situations in which a 1031 exchange would be permissible and

advantageous to a client and assist clients in finding the needed experts to carry

out the exchange.

A 1031 exchange involves an exchange of like-kind real estate. It is treated

under the tax code as a continuation of the ownership of the property instead

of a taxable sale. The tax-deferred exchange of assets is neither a tax loophole

nor a privilege available only to wealthy investors. It is a method of equity

preservation available to all owners of investment and trade or business

property. The benefits extend beyond conserving capital assets. Tax-deferred

exchanges can be used to:

Increase equity by deferring capital gains tax.

Acquire property with more appreciation potential.

Consolidate assets by combining several properties into one larger asset or

diversify holdings by exchanging one large asset for several smaller ones.

Acquire a future retirement residence. (Special rules apply.)

Divide real estate holdings prior to distribution to heirs.

Relocate or increase investment holdings in another location.

Obtain space for business expansion.

Dispose of underperforming property.

Increase net cash flows by acquiring a property with better financing.

Obtain non-taxable cash by acquiring property that can be mortgaged.

(Special rules apply.)

Increase depreciable property basis by acquiring higher-value property or

exchanging bare land for improved property.

Increase estate value by acquiring more valuable properties.


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BASIC RULES FOR TAX-DEFERRED 1031 EXCHANGES

Under the Tax Cuts and Jobs Act, Section 1031 now applies only to

exchanges of real property and not to exchanges of personal or intangible

property.

The properties, both old and new, must be used in trade or business or held

for investment. Property that is held for resale is considered dealer property

and is not eligible for a 1031 exchange. A personal residence is not eligible

for exchange.

Property must be exchanged for like-kind property.

The names of title holders on the replacement property must match those

on the title of the relinquished property.

Replacement property must be identified within 45 days of transferring the

relinquished property.

The replacement property must be acquired (closed) within 180 days of

transferring the exchange property or the tax filing deadline, whichever

comes first. The tax filing deadline can be extended to preserve the 180-day

replacement method.

There is no limit on the number of properties that may be relinquished.

The limits on replacement properties are one of the following:

Maximum of three replacement properties without regard to fair market value (otherwise known as the "three-property rule," which is the most commonly used)

Any number of replacement properties with aggregate value not exceeding 200 percent of the value of the relinquished property

Any number of replacement properties if the exchanger receives 95 percent of the aggregate value of all identified properties

What Is Like-Kind?

The term “like-kind” is one of the concepts most widely confused by investors

who think erroneously they must acquire a replacement property exactly like

the relinquished property. Like-kind does not refer to the type of property;

instead, it addresses the use of the property. A property used in trade or

business or held for investment must be exchanged for property to be used in

trade or business or held for investment.

Slide 167:–Slide 168: Basic Rules for Tax-Deferred 1031 Exchanges

I-Note: STATE the basic rules for a 1031 exchange, including taxable boot. EMPHASIZE that property must be for investment, trade, or business.

Slide 169: What Is Like-Kind?


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Some examples of like-kind are:

A condominium for a duplex

A rental house for a multiunit rental

Bare land for an apartment building

Ranch land for an office building

Several rental houses for an office building

Property Not Eligible for 1031 Exchange (Either Relinquished or Replacement)45

Personal residence

Domestic properties for foreign properties

Stock in trade and other property held primarily for sale (inventory or dealer

property)

Stocks, bonds, notes, or other types of securities, evidences of

indebtedness, or interest

Machinery, equipment, vehicles, artwork, collectibles, patents and other

intellectual property and intangible business assets

Taxable Boot

Cash or non-like-kind property, known as boot, received in an exchange is

taxable. For example, if an exchanger acquires a replacement property of lesser

value than the relinquished property, the resulting cash out would be taxable.

Mortgage relief is also considered taxable boot. Although the exchanger is taxed

on the boot received, that tax will be less than the amount of capital gains tax

owed on an outright sale of the property. In any case, the amount of tax owed

on boot can never exceed what would be owed on a sale.

Documenting the Intent to Exchange

When the intent is to transfer and acquire property through a tax-deferred 1031 exchange, the purchase and sale agreement (or an addendum) should contain language reflecting the exchanger’s intent and requesting the other party’s cooperation. If the exchanger decides prior to closing not to proceed with the exchange, the transaction is simply closed as a taxable transaction. The wording could be as follows: “It is the intent of the seller to perform a Section 1031

45 Under the Tax Cuts and Jobs Act, Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property.

Exam Question 33

Slide 170: Taxable Boot

Slide 171: Documenting Intent to Exchange


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exchange, and the buyer is asked to cooperate by signing an Assignment Agreement at no cost or liability to the buyer.”

EXCHANGING A VACATION HOME Vacation homes held for both personal use and investment purposes can be

viewed as mixed-use. It is possible for the character of the property to take on a

primarily personal appearance even with the occasional rental activity. In such a

case, the property will be considered primarily personal in use and will not

qualify for a 1031 exchange. Because it does not qualify as a personal residence,

the disposition or sale of the vacation property will produce a taxable event. If

personal use of a vacation home is minimal (no more than 14 days or 10 percent

of the days it is rented out), it can be successfully argued that the property is

held primarily for investment. Where income earned has been substantial, it can

also be successfully argued that the property is primarily for productive use in a

trade or business. Both uses qualify the property for 1031 treatment.

PERSONAL RESIDENCE RECEIVED IN AN EXCHANGE

What if an investor purchases a residential property that is not currently a rental

property, in an exchange? A property acquired in a 1031 exchange and later

converted to a principal residence must be owned for five years and lived in for

two years from the date of the exchange before the owner can sell the

residence and claim the $250,000 (S)/$500,000 (MFJ) capital gains exclusion on

the sale of a principal residence. If the exchanger moves into the property

immediately after the transaction, it could invalidate the exchange on the basis

of non-like kind. Most exchange experts counsel that the exchanger should wait

two years before moving into the residence. In the interim, the property could

be rented, at fair market rent, to a tenant. The tenant could even be a family

member, such as a child, but the IRS may scrutinize the validity of the lease

when family members are involved.

CASE STUDY

Edward wants to relocate to Scottsdale, Arizona, from Albany, New York. He

currently owns an income property, Center Court Apartments, in Albany. He

would like to maintain an investment in rental property and wants to

acquire a similar property in Arizona. If he sells the Albany property

outright, he will face a hefty tax bill. A tax-deferred exchange of real

property seems like a good option.

Susan lives in Scottsdale, Arizona, and owns Silver City Apartments. She

recently inherited the apartment building from her father’s estate and has

no interest in being a landlord. She would prefer to sell the property.

I-Note: EXPLAIN how a vacation home could qualify for an exchange. EXPLAIN the treatment of a personal residence received in an exchange.

Slide 172: Exchanging a Vacation Home

Slide 173: Personal Residence Received in an Exchange


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Bob recently received a cash windfall from stock options and would like to

put his money into real estate. He currently does not own any investment

property.

1. Edward engages the services of a QI. On May 1, Edward contracts to sell Center Court Apartments to Bob for $1,000,000 with a closing date of May 17. Edward assigns all rights in his agreement with Bob to the QI.

2. On May 5, Edward notifies Bob in writing of the assignment of rights and on M ay 17, Bob and Edward close on the sale of Center Court Apartments.

3. Bob pays $100,000 at closing into Edward’s escrow account with the intermediary (QI).

4. On June 1, Edward identifies Silver City Apartments as a replacement property (within the 45 days).

5. On July 5, Edward contracts to purchase Silver City Apartments from Susan for $900,000, assigns his rights in that agreement to the QI, and notifies Susan in writing of the assignment.

6. On August 9, the QI pays $900,000 to Susan and deeds Silver City Apartments to Edward. The QI then transmits the remaining $100,000 to Edward to close the exchange. Edward will have a partially-taxable exchange due to the $100,000 (cash boot), but he can deduct his exchange expenses from the $100,000 to determine how much is taxable.

A visual representation of this 3-way exchange follows on the next page.

Slide 174: A Typical 3-Way Exchange (next page)

I-Note: DESCRIBE a typical three-way exchange based on the example.


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QUALIFIED INTERMEDIARIES

In the preceding example, a qualified intermediary handles the exchanges of

deeds and cash. Exchange transactions are complicated endeavors and if not

carried out correctly, the tax benefits are lost; therefore, the involvement of an

expert is essential. An exchange accommodator, a qualified intermediary (QI),

should be involved before elements of the transaction are put into play. Use of

the QI prevents actual or constructive receipt of cash proceeds, an event that

would disqualify the exchange and produce a tax bill for the exchanger.

It is important to seek out a reputable, experienced, and expert accommodator

to act as intermediary. QIs are not licensed or regulated, except in Nevada. The

Certified Exchange Specialist Designation program offered by the Federation of

Exchange Accommodators provides some assurance of knowledge and

competence. There is no requirement for bonding or insurance, although most

QIs maintain both.

QIs sometimes charge nominal fees because they make a considerable amount

of money from the interest on cash held on behalf of clients. Some QIs keep all

the interest and others keep a portion. An exchange agreement should state the

QI’s split of the interest. The exchange agreement should also stipulate that the

QI cannot resign; QI resignation invalidates the exchange. Encourage your client

to carefully review the details of the exchange agreement and consult with an

attorney. Some exchange agreements go to great lengths to protect the QI but

offer little protection for the client.

WHY EXCHANGES FAIL

Real estate professionals who specialize in exchanges estimate that up to 40

percent of exchange transactions fail for several reasons:

Missed deadlines (the 45-day and 180-day rule).

Lack of suitable replacement properties.

Negotiations breakdown—if the owner of a replacement property knows

that the exchanger has time constraints, it may be used as negotiation

leverage on price or terms.

Lack of patience—for those accustomed to sell and buy transactions, the

sequence and time frames of an exchange, particularly a reverse or deferred

one, can seem overlong and out of sync.

Focusing too much on acquiring the first-choice property and not

developing a “plan B” or contingency plan.

Slide 175: Qualified Intermediaries

Slide 176: Why Exchanges Fail

I-Note: NOTE reasons why exchanges fail.


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COMMUNITY PROPERTY

Almost a third of the U.S. population lives in one of the community property

states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,

Washington, and Wisconsin. These states include some of the nation’s fastest

growing urban areas as well as popular vacation-home and retirement locations.

California, Arizona, and Texas alone account for more than 20 percent of the

U.S. population. This is important knowledge for a real estate professional

because community property ownership of real estate is determined by the

location of the property, not the residence of the owner.

The basic principle of community property is this: All property acquired during a

marriage is presumed to be community property with each spouse owning an

equal share. Community property status is retained even if the couple moves to

a common-law state, although separate property moved to a community

property state retains is separate status. The income from community property

is considered community property. In Texas, Louisiana, and Idaho, even income

from separate property is community property unless spouses specifically agree

otherwise.

In the context of capital gains, community property status is important because

when one spouse passes away, both the deceased and the surviving spouse’s

share of the property receives a basis step-up to fair market value. The basis

step-up resets the basis for the entire property. If the surviving spouse sells the

property, capital gains tax will be due only on the amount in excess of the

stepped-up basis. When a married couple owns greatly appreciated real

property, this basis adjustment can yield considerable tax savings for the

surviving spouse; in essence, all the capital gains tax that would be due on the

value appreciation during the couple’s ownership of the property together is

forgiven upon the death of one of the spouses. Property must be titled as

community property, not joint ownership, and be included in the deceased

spouse’s estate in order to qualify for the basis step-up.

Separately owned property can be converted to community property by gifting

one-half of a spouse’s separate property to the other spouse; gifts between

spouses are neither taxable nor limited, except for non-U.S. citizen spouses.

However, if the recipient spouse dies within one year of the gift and the

property is passed back to the original donor, the basis of the gifted portion will

not be stepped up to fair market value.

I-Note: REVIEW the principle of community property in relation to real estate.

Slide 177: Community Property


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TAXES ON SOCIAL SECURITY AND PENSION INCOME

If Social Security is a sole source of income, benefits are not taxable because

they do not exceed the base amount. But 50 percent to 85 percent of Social

Security benefits are taxable if a recipient’s income from other sources exceeds

a base amount.

As a rule of thumb, add one-half of the total Social Security income received to

all other income, including tax-exempt interest. If the total is more than the

base amounts—$34,000 for a married couple filing jointly and $25,000 for

single, head of household, widow/widower with dependents, or married filing

separately—Social Security benefits are taxable as income.

Distributions from pension accounts, deferred compensation, traditional IRAs,

and 401(k) plans are generally taxable because contributions to these accounts

are made with pretax dollars. The advantage is that in many cases the recipient

is in a lower tax bracket during retirement than during working years.

INSTALLMENT SALES

If the seller has substantial equity in the property and does not require a lump-

sum payment from the sale, an installment sale is an option that can provide tax

benefits. The seller pays tax only on the amount received during the calendar

year, instead of the entire amount, which spreads out the tax liability. For tax

purposes, each payment received is apportioned between ordinary income and

capital gain. If the home sold qualifies for the IRC 121 Exclusion and the gain is

under $500,000 for married filing jointly (MFJ) or $250,000 for single (S), then

only the interest accrued each year would be taxable. Title may or may not pass

to the purchaser at the time of the installment sale, depending on state law.

As with any other real estate transaction, the seller should negotiate a down

payment—20 percent down payment is advisable. The seller then assumes the

role of a lender and carries back the loan. The buyer makes regular payments,

usually monthly. At least one payment must be received in the tax year after the

sale. For older sellers, the loan structure should be amortized over 30 years but

due in 10–15 years. This ensures that the principal stays relatively intact and

creates a favorable situation for the heirs.

Benefits

A larger pool of potential buyers

Some buyers look for only properties that offer seller financing. They may

have difficulty getting a conventional loan. For example, sometimes it is

difficult for a self-employed buyer to obtain a conventional loan because of

income-verification requirements, even if the borrower has perfect credit.

I-Note: EXPLAIN how Social Security may be taxed. NOTE that pension payouts are almost always taxable because contributions are usually made with pretax dollars.

Slide 178: Taxes on Social Security and Pension Income

I-Note: EXPLAIN the structure of an installment sale. DESCRIBE the benefits for senior home sellers of an installment sale. NOTE that an installment sale to a family member must charge market-rate interest. The IRS sets a minimum amount of interest the seller is considered to have received. If interest is not charged or the rate is too low, the imputed or unstated interest is taxable.

Slide 179: Installment Sales


144

Tax benefits

Tax consequences depend on individual circumstances, but hefty amounts

of taxes can follow a large capital gain—especially in high-value areas. Seller

financing reduces the tax burden by spreading the gain over time as

payments are received. It may prevent being bumped into a higher tax

bracket or allow time to take some capital losses to offset the capital gain.

Good interest earnings

Seller financing rates are usually higher than the rate paid by money market

accounts and CDs.

Relatively safe investment

Seller financing with at least a 20 percent down payment and a responsible,

creditworthy buyer can be a very secure investment. The seller receives

monthly income, with a relatively high interest rate, and the investment is

secured by real property.

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146


147

RISK MANAGEMENT ISSUES

Many real estate brokerages have a program of risk-reduction measures to deal

with common issues such as client representation, records management, and

agent compensation. Working with clients and customers in the 50+ market can

present distinct issues, situations, and challenges. Real estate professionals

need to know how to respond to protect their clients’ interests as well as their

own. Even with the best of intentions, lack of awareness can lead to delayed or

disrupted transactions and sometimes conflicts of interest. Real estate

professionals can protect themselves, their clients, customers, and transactions

by asking the right questions and knowing when to advise their clients to seek

legal counsel.

The following discussion deals with general principles of legal issues; your

instructor will alert you to state-specific issues and regulations.

CONFIDENTIALITY ISSUES The REALTOR® Code of Ethics affirms the responsibility to maintain client

confidentiality. Real estate professionals who specialize in the 50+ market know

that there can be distinct challenges to overcome when clients are very elderly

or infirm.

A relative or child may make first contact

In a crisis situation, it is often an adult child or other relative who makes the

first contact. The real estate professional should ask tactfully if the elder

buyer or seller is aware of the conversation and a willing and informed

participant in the transaction. It is also important to establish if the family

member has the legal authority, such as a power of attorney, to conduct the

real estate transaction.

Verify ownership and identity

If in doubt, take the extra step to ascertain true ownership of the property

and who has the authority—power of attorney—to rent or sell it. Ownership

can be verified with a quick check of tax records. Also, verify the identity of

the person you are talking with and the relationship with the elderly owner.

Ask for permission to share confidential information

A real estate professional must deal with the owner directly unless

authorized to deal with others, such as family members. The real estate

professional should ask for, and document, an elder client’s permission to

share transaction information with family members. The Code of Ethics

states that REALTORS® must keep client information confidential, but the

client can consent to sharing information.

Slide 181: Risk Management Issues

I-Note: INFORM students that the chapter covers some of the unique legal and risk management issues and challenges that can arise when working with the 50+ market.

Slide 182: Confidentiality Issues

Exam Question 34

I-Note: LEAD a discussion of confidentiality issues. ENRICH the discussion with examples from your own experience. INVITE students to share examples of how they have handled similar situations.


148

Involvement of family members

Relatives or caregivers can assist both the elderly homeowner and the real

estate professional by acting as guides, interpreters, and facilitators. They

can help an elder work through the emotional and practical issues that may

be involved in selling a home. A real estate professional can help by keeping

the relative up to date and providing copies of transaction documents.

Adult children don’t always know

Adult children may have little or no knowledge of the parent’s financial

affairs. Furthermore, children may be inexperienced when it comes to

buying and selling real estate and lack market knowledge. The real estate

professional can help by identifying needed information and sources.

Provide information on alternatives

When the children live in another community or state, they may be

unaware of care and community support services that could help an elderly

parent remain in the home. A specialist can help a family make choices by

providing information and contacts and sharing examples of what other

families have done.

Be alert

Unfortunately, even family members can have bad motives and intentions.

The real estate professional should be on the lookout for fraud such as

selling properties out from under elders. The REALTOR® Code of Ethics

states that a REALTOR® is not bound by confidentiality if a crime is intended

and can be prevented.

SELLING BELOW MARKET

Experienced real estate professionals advise caution when asked to list a home

at a below-market price. Why does this happen? Consider these circumstances:

The seller accepts a below-market offer in order to sell the home to a

relative and other family members question the deal.

A high-value home is priced low for quick sale and the heirs question the

deal.

The seller says, “This is how much I want. I just want a quick sale.”

What should the real estate professional do? Write a letter to the client stating

that the property is listed below market value. Prepare a CMA showing the

current value and ask the seller and buyer to sign it in order to acknowledge the

below-market price or offer. Keep all the documentation justifying the price.

Market the property as a “best value in the community.”

Slide 183: Selling Below Market

I-Note: DESCRIBE situations in which clients approve a below-market sale and what the real estate professional can do. REMIND students that FHA rules on reverse mortgages require a fair-market, arm’s-length sale.

Exam Question 35


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POWER OF ATTORNEY A power of attorney authorizes a person to act as a legal representative, an

attorney-in-fact, for another and to make binding decisions in medical, legal,

and financial matters. Authority can be unlimited in scope and duration or

limited to a specific time frame or certain types of decisions, such as medical

care.

Creating a power of attorney can be a rather simple process, but the specific

language required for certain types of powers of attorney can vary from state to

state, so it is best not to try to create one on your own. A number of websites

offer power of attorney forms for free or low cost, but these may not be

tailored to your state. Financial and health care institutions often provide, and

prefer, their own forms because their attorneys have reviewed the forms to

ensure they are legally adequate for the purposes of those institutions. When

having an older adult sign documents, it may be beneficial to have a witness

present who may sign a statement that the witness was present and establish

the witness' relationship to the owner. A valid power of attorney document

requires notarization and possibly the signatures of one or more witnesses.

A power of attorney may take effect immediately, at some point in the future,

under certain specified conditions, or a springing event, such as incapacity due

to illness. States do not generally require registration of powers of attorney with

one exception: real estate transactions. Some states require registration of a

power of attorney for real estate transactions with the land records office.

Real estate professionals should be alert for the following issues related to

powers of attorney. Although not specific to the elderly, these issues can arise

more frequently when working with senior clients.

Proof of power of attorney

If someone other than the owner claims to be authorized to act for an elder

in a real estate transaction, it is appropriate to ask to see proof of power of

attorney or an attorney’s letter attesting to such authority. If a transaction

involves someone acting under a power of attorney, a copy of that power of

attorney will become a part of the transaction documentation.

Power of attorney ends with death

A power of attorney terminates when the grantor passes away or becomes

incapacitated. After the power of attorney is terminated, it does not

authorize the holder to settle estate matters or dispose of property. If

someone claims to have power of attorney to dispose of real property after

the owner has passed away or become incapacitated, the real estate

professional should ask for verification of authority. Upon death, an

executor, named in the will or appointed by the court, assumes

responsibility for settling estate matters and disposing of property as

Slide 184–Slide 185: Power of Attorney

I-Note: PROVIDE an overview of powers of attorney. INFORM students if the state in which you are teaching requires registration of powers of attorney for real estate transactions.

Exam Question 36


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directed by the terms of the will. Court-issued testamentary letters

authorize an executor to transact estate business.

A durable power of attorney differs from an ordinary power of attorney in

that it will survive the incapacity of the grantor and may, in fact, only come

into effect upon the incapacity. The real estate professional should still ask

for verification of authority in situations where someone claims to have

authority to buy, sell, or manage property for a principal who is

incapacitated.

A health care proxy cannot authorize other actions

A power of attorney authorizing decisions about medical care, sometimes

called a health care proxy, does not authorize the holder to act on other

matters. Completion of a durable power of attorney often accompanies

creation of an advance directive, or living will, specifying limits on

resuscitation or invasive life support measures. But that power of attorney

may be limited only to medical decisions and immediate financial needs.

The health care proxy does not have the authority to sell or transfer

property to heirs or handle estate matters.

Acceptance in other states

Although states generally recognize powers of attorney granted in other

states, details, such as the number of witnesses, can stall acceptance of the

authority to act. Hospitals and financial institutions, like banks, mortgage

companies, and insurers, may require completion of their own power of

attorney forms. When a power of attorney must cross state lines or several

institutions are involved, completion of several powers of attorney forms

may be necessary to ensure that the authorized person can take action. This

is especially important when real estate is involved and the attorney-in-fact

resides in another state—particularly if the state requires registration of a

real estate power of attorney.

Spouses do not have an automatic power of attorney

A surviving spouse has authority to make decisions regarding jointly owned

property with right of survivorship (joint tenancy or tenancy by the entirety)

and to manage jointly held bank accounts. But if one spouse becomes

incapacitated, the other does not automatically have the authority to

dispose of property or make decisions about financial matters. As we will

see in the following section, it may be necessary to petition for a court-

appointed guardian when issues of competency or incapacity are involved.

In a situation like this, the real estate professional should verify that the

spouse has authority to act in real estate transactions.


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Terminating a power of attorney

As noted above, a power of attorney ends when the grantor passes away.

But there are other conditions that terminate a power of attorney:

Divorce (durable power may survive in some states)

Inability of the designated person to assume the duties and no successor is specified

Invalidation by a court

Revocation by the grantor

What if no power of attorney exists?

Sometimes action must be taken to safeguard assets or complete a

transaction, but the person who has authority to do so is no longer capable

or competent or has passed away. When no one else is authorized to act,

someone may petition the court to appoint a guardian or conservator to

protect the interests of the incapacitated person or other interested parties.

Before listing, or upon taking the listing before marketing, have a title company

with which you have a relationship look over the power of attorney. The title

company will need to see the power of attorney at some point in the

transaction and is often willing to review this prior to the transaction taking

place; the same process applies for trusts.

CONSERVATORS, GUARDIANS, AND EXECUTORS

The courts may appoint a conservator or guardian with the authority to manage

the personal needs and financial resources of the person who lacks legal

capacity. Or the courts may appoint an executor to settle estate matters.

What is the difference?

Conservator

Appointed to manage property

Guardian

Appointed for the protection of a person or an estate

Executor

A personal representative identified in a will as responsible for carrying out

the instructions and wishes of the deceased

Administrator

A court-appointed estate executor

Slide 186: Conservators, Guardians, and Executors

Exam Question 37


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Conservator

A conservator is appointed to manage the assets of people who lack capacity to

make decisions. Although laws vary among states, the conservator usually needs

court authorization to sell real estate. The court may appoint the same

individual as conservator and guardian.

Guardian

A court-appointed guardian for a person is responsible for ensuring food,

clothing, shelter, and medical needs are met. A guardian for an estate is

responsible for managing financial affairs. The same individual can be a guardian

for both the person and the estate. The spouse is usually the court’s first choice;

the second choice is a child or relative. If a relative is not available and able, the

court may appoint some other party or a public guardian. A person who is to be

placed under guardianship is entitled to receive a copy of the application, be

present at hearings, and be represented by an attorney. The party filing the

application for guardianship must prove incapacity. In emergency cases, a court

may appoint a temporary guardian if the person or property is in imminent

danger.

Executor

The executor accounts for all the assets of a person who passes away and makes

sure heirs receive inheritances per the instructions in the testator’s will. The

executor also settles debts and taxes owed by the estate. An executor usually

has the authority to sell real property if needed to settle debts and pay

expenses, like medical and funeral expenses. The will, however, must expressly

authorize sale of real property for any other purpose.

A real estate professional, whether representing a buyer or seller, can ask for

verification of an executor’s authority to sell a property and should not assume

that a person appointed to act as executor knows the extent of authority

granted in the will.

Who Cannot Be Appointed

People who cannot serve as guardians or conservators include:

Minors

Anyone involved in a lawsuit or adverse claim against the person or

property or who owes a debt

A nonresident without a resident agent

Someone specifically eliminated in a will or designation of guardianship

I-Note: EXPLAIN the role of a court-appointed guardian, conservator, and estate executor or administrator. DESCRIBE their real estate transaction authority.


153

Disadvantages

Disadvantages of court appointment proceedings are:

Records and proceedings are public record

Expense of court costs

Appointee may be a stranger

Recovery requires court proof

Conflicts of Interest

Real estate professionals who specialize in the 50+ market often develop close

relationships with their elder clients. But a real estate professional should not

become a trustee, guardian, or conservator for a client without first consulting

an attorney. Despite good intentions, the situation can be fraught with potential

conflicts of interest, and family members may accuse the real estate

professional of taking advantage of their elderly relatives.

COMPETENCY ISSUES

A child may state that a parent is not competent to handle business affairs, but

the parent is still the owner of the property and the deal cannot go forward

without consent and signature. The parent is viewed as competent until

declared legally incompetent.

Remember, appearances can be deceiving. Years of observing social

conventions—“Hello, how are you? I’m fine.”—become durable habits that even

those in advancing stages of dementias and Alzheimer’s can summon up like a

reflex. But, in the next minute, they forget who they spoke to or fail to recognize

family members. Medical professionals refer to this as social convention

abilities.

The real estate professional must handle this situation very tactfully and avoid

the appearance of doubting the family member or caregiver. However, do not

let yourself be put in the position of judging the veracity of statements,

authenticity of documents, or competency of clients. Ask for proof of a power of

attorney or court appointment as a conservator or guardian and appropriate

authorization.

The best course of action may be to withdraw from a conflicted situation until

the competency issues are resolved. If you are a buyer’s representative and

your client makes an offer on a property that is embroiled in a family conflict,

make sure the contract is contingent on an attorney’s review to ensure that the

buyer receives a clear title.

I-Note: ADMONISH students about potential conflicts of interest.

Slide 187: Conflicts of Interest

Slide 188: Competency Issues

I-Note: DESCRIBE issues involved in legal competency. PROVIDE examples from your own experience. EMPHASIZE the importance of empathy for caregivers.


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Case Study: Five Acres for Sale

Real estate professional Rhonda received a call from Cal Marsh stating that he

owned a five-acre lot and was interested in listing it for sale. Rhonda was

familiar with the property and

thought that Cal’s mother was the

owner. In checking tax records,

Rhonda discovered that the property

was in fact owned jointly by Cal’s

mother and aunt. When she asked Cal

Marsh about the ownership, he stated

that he handled his mother’s business

affairs. Rhonda wrote the listing

contract, but Cal’s mother refused to

sign it. His aunt also refused to sign the listing contract. A several-years-old

appraisal valued the property much higher than the current market value. The

market dropped since that appraisal but the aunt could not understand why

the property would not fetch the same high price now. Cal said his mother

was not competent to sign a contract, but she seemed lucid when Rhonda

met her.

What are the issues involved in this scenario? What would you do in this

situation?

I-Note: ASK students to identify the issues presented in this case study. ASK students what they would do in this situation. AFFIRM that the purpose of these case studies is not to make anyone feel bad, but to raise awareness of the types of events and issues.

Issues include: power

of attorney,

competency of mother,

outdated appraisal.

Solutions: Ask to see a

power of attorney, or

attorney’s letter,

authorizing Cal Marsh

to act on his mother’s

behalf. The mother and

aunt are the owners of

the property, and the

deal cannot go through

without their consent.

Prepare a current CMA.


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Case Study: Letting Go

Soon after Marty and June celebrated their 50th wedding anniversary, Marty suffered a stroke that severely impaired his cognitive abilities. When Marty

was moved from the hospital to a care facility, June moved in with her daughter. It was clear to all that she could not manage on her own. June’s daughter called real estate professional John and asked him to help sell her parents’ home. She said that her father, who used to handle all the financial matters, was incapacitated, and her mother could not deal with all that goes into listing,

showing, and selling a house. Everyone is suffering the loss and the realization that Marty will not recover; June is depressed and has become very withdrawn lately. When John asked about the ownership of the house, June’s daughter said that as far as she knew her parents owned it jointly—they shared everything.

What are the issues involved in the situation? If you were June’s agent, what would you do?

I-Note: ASK students to identify the issues presented in this case study. ASK students what they would do in this situation. Issues include: Marty’s legal competence, June’s emotional state and inability to make decisions, dealing with loss, Marty’s medical bills, ability and authority of June’s daughter to act on her mother’s behalf. Possible answer is to make a legal determination of the incapacitated spouse’s competency before the house can be listed and sold. June does not have the authority to act alone until Marty is declared legally incompetent. Dealing with this determination will not be easy for the family; it makes the realization that Marty is not coming back a reality.


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WHEN A CLIENT DIES OR BECOMES INCAPACITATED

What happens if a client dies during a transaction, the term of a listing, or after

making an offer to purchase? Generally, if a seller passes away during the term

of a listing, the authority to market and sell the property per the listing contract

terminates. A commission may still be due the listing agent if there was an

accepted offer prior to the death. If a buyer passes away, it does not necessarily

cancel an accepted offer to purchase. From a practical standpoint, the buyer’s

representative may wish to discuss the situation with the listing agent and work

out a settlement short of the estate buying the property. Once appointed, the

buyer’s personal representative or the executor of the estate may either

complete the transaction or negotiate a contract termination.

When a buyer or seller becomes incapacitated, it is a much murkier situation.

Unless the individual has executed a power of attorney authorizing another to

handle legal matters, a court proceeding is needed to designate a

representative to act on behalf of the buyer or seller.

PROBATE

The probate process ensures—literally proves—that the intent of a decedent is

followed. Probate proceedings can last up to a year or longer, and expenses can

run as high as 10 percent of the estate. The proceedings are public record, and a

court-appointed administrator may not be a relative, which involves an outsider

in family matters. On the other hand, probate is a court-ordered proceeding,

provides notices to creditors, and provides a process for settling objections by

heirs and creditors.

Some assets pass to heirs outside of probate. For example, life insurance

proceeds paid to a beneficiary other than the estate itself are not subject to the

probate process. Property titled as joint ownership with right of survivorship

and community property with right of survivorship (where allowed) pass to the

joint owner outside of probate. Assets held in a trust generally bypass probate.

Listing a Property in Probate

The court decides the necessity or advantage of the sale.

The sale may be ordered to pay debts and taxes.

Publication of a sale notice is required unless waived in the will.

The listing is signed by the personal representative with approval of the court.

The court approves the amount of brokerage compensation.

A hearing is required to confirm the sale.

Slide 189: When a Client Dies or Becomes Incapacitated

Exam Question 38 I-Note: DESCRIBE what happens if a client passes away or becomes incapacitated during a transaction, listing, or after making or accepting an offer.

Slide 190: Probate

I-Note: PROVIDE an overview of the probate process and how to handle listing of a property in probate proceedings.

Slide 191: Listing a Property in Probate


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LIFE ESTATES AND TRUSTS

A trust is an estate planning entity that manages the use and distribution of

assets. A trust that is created during the owner’s lifetime is called a living trust.

A trust that is created upon the owner’s death is called a testamentary trust. A

living trust holds assets during life and distributes them at death. A trust can be

revocable, which means it can be changed or revoked any time prior to death,

or irrevocable. By holding real estate in a trust, individuals can preserve the use

of the home for themselves and control the eventual transfer to heirs without

probate. Upon death, the trustee takes over administration, and the trust

continues for the benefit of named beneficiaries. A trust can also be used during

the owner’s lifetime to plan ahead for possible incapacity and avoid

appointment of a conservator or guardian. Creation of the trust and transfer of

assets to it are not a matter of public record, so privacy is maintained.

The trust can hold real estate and pass it to heirs without the need for probate.

This is advantageous for the heirs of an individual who owns real property in

another state because it avoids the hassles of going through a probate process

in more than one state. In an era of blended families as a result of divorce and

remarriage, a trust arrangement also ensures that estate assets go to the

intended heirs.

An attorney should create the trust documents and assist with transfer of assets

to the trust (the cost is usually $1,200–$1,500). Unfortunately, boiler-room sales

operations sometimes target the elderly and use high-pressure tactics to sell

living trusts; the victim pays several thousand dollars for what amounts to a set

of preprinted forms.

A/B or Marital Trust

Spouses can establish an A/B, or marital, trust to create a federal tax exemption,

twice postponing tax on their estate. Each spouse puts his or her property into

the trust. When the first spouse dies, his or her half of the property goes to the

beneficiaries named in the trust, usually the couple’s children, with the

important condition that the surviving spouse has a life estate, the right to use

the property for life, and is entitled to any income it generates. When the

surviving spouse dies, the property passes to the trust beneficiaries. It is not

considered part of the second spouse’s estate for estate tax purposes. Using this

type of trust keeps the second spouse’s taxable estate at half the size it would

be if the property were left directly to the spouse. This type of trust is also

known as a marital life estate trust or credit shelter trust.

Note: Tax legislation referred to as the Deceased Spouse Unused Exclusion

(DSUE) can accomplish many of the same benefits as the A/B Trust.

Slide 192: Life Estates and Trusts

I-Note: DESCRIBE the purpose and uses of trusts and life estates.


158

Does Your Client Own Real Estate in Mexico?

Low cost of living, mild climates, upscale housing developments, and ease of travel draw many U.S. retirees to Mexico. Real estate ownership in most of the desirable locations is restricted. Within 100 kilometers of the borders, or 50 kilometers along coastlines, foreigners can own real property through a trust called a fideicomiso. The owner’s trust interests, however, pass to named beneficiaries outside of probate—an advantage for heirs.

ELDER LAW ATTORNEY As we have seen in the preceding material, working with buyers and sellers in

the 50+ market, particularly the elderly, can present some distinct issues. An

attorney who specializes in elder law can help elders and their families deal with

immediate issues and plan ahead for life transitions. Although this chapter has

covered a number of issues that arise when a property owner passes away, an

elder law specialist deals with a broader range of concerns. Attributes that

distinguish the elder law attorney are:

Life-Focused

emphasizes sustaining a long life

Integrated

Incorporates legal issues into the larger picture of maintaining

independence and quality of life

Interdisciplinary

Partners with other professionals—real estate professionals, social workers,

health practitioners, financial planners—in a holistic approach46

Certified Elder Law Attorney (CELA)

The National Elder Law Foundation (NELF) offers a certification program for

attorneys who specialize in and devote a substantial portion of practice to elder

law. The NELF certification is approved by the American Bar Association. The

foundation offers an online directory of certified attorneys. NELF certification is

voluntary, and many attorneys who are competent and experienced in the field

of elder law do not hold the certification. However, the CELA certification

demonstrates an investment in and commitment to the specialty.

46 Charles P, Sabatino, “Elder Law, a Perspective on Present and Future,” American Bar Association Commission on Law and Aging, http://new.abanet.org/aging.

Slide 193: Elder Law Attorney

Exam Question 39


159

Checklist: Selecting an Attorney

Does the attorney have expertise and a good track record in the area of law

you need?

Does the attorney explain legal terms in a straightforward manner?

Will you feel comfortable working with the attorney and sharing

confidential information?

Does the attorney pay attention, take notes, ask questions, and follow up on

the points you bring up? Does the attorney return your calls within a

reasonable time?

Is the attorney’s appearance and demeanor professional?

Is the attorney willing to provide references?

Ask what schools the attorney graduated from; check credentials with the

state bar association.

Look at the condition of the office. Does it look organized and well run?

Is the computer equipment up-to-date and a match for the staff?

The office location is a good indication of rates to expect. Are the firm’s

costs reasonable? Are you paying for a firm name but receiving the services

of a law clerk? If an associate lawyer is working with you, is the associate

supervised by a senior attorney?

Hourly rates should not always be the only determining factor. An attorney who

has low hourly rates but lacks expertise may need more time to complete a job

and actually cost more in the long run than an attorney with higher hourly rates

and the expertise to do the job properly.

Slide 194: Checklist: Selecting an Attorney

I-Note: SUGGEST that students share the following attorney-selection checklist with clients.


160

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162


163

As we have seen in preceding chapters, demographics alone tell us that the 50+

real estate market segment will expand as mature adults and baby boomers age

and live longer, healthier lives. Although most prefer to stay in familiar

communities, their housing needs and preferences will change as they age

through life phases. For the real estate professional, now is the time to start

building relationships that will pay off in the future. It’s a well-known fact that

buyers and sellers like to do business with people they know, but there is a lot

of competition for consumers’ attention and loyalty. How can you get

acquainted with prospects in the 50+ market, distinguish yourself, and

communicate a winning value proposition?

Earning the SRES® designation says a lot about your commitment to and

seriousness about serving mature and baby boomer buyers and sellers. In this

chapter, we will look at practical steps you can take to put the SRES®

designation to work for you in your marketing plan. We’ll look at how to make

contacts and establish relationships as well as do’s and don’ts of marketing to

mature and baby boomer consumers. As many specialists will attest, the real

estate professional who invests the time and effort today in nurturing a network

of prospects will gain a reputation as a trusted real estate advisor that will pay

off in the future.

THE HALF-CENTURY CONSUMER

How do people who have reached and surpassed the half-century mark view

themselves as consumers? What are their needs and wants in a home for today

and the future? And what are the best ways to approach them and win their

attention and loyalty?

Conservative, Loyal, Frugal

Mature consumers imbue brands with trustworthiness and authority and

consider brand loyalty a virtue. Remember the “This is not your father’s

Oldsmobile” advertising campaign? It is a good example of attempting to

capture the boomer market by playing on the brand loyalty of the parents’

generation. On the other hand, boomers are more likely to experiment with

new and different brands.

Thrifty spending habits characterize the elder and mature consumers who

experienced economic shocks. Fear of outliving assets reinforces their penny-

wise approach. Free-spending boomers have responded to the economic

shockwaves that began in 2008 with a new-found frugality.

Not in a Hurry

Unless faced with a crisis situation, most age 50+ home buyers and sellers don’t

need to rush into a transaction. Regardless of how realistic the viewpoint, both

buyers and sellers have a “waiting for the right price/property” mindset. High-

Slide 196: The Half-Century Consumer

I-Note: LEAD a discussion of consumer behavior of mature adults and baby boomers. ENRICH the discussion with examples from your own experience.

Exam Question 40


164

pressure tactics will likely backfire. Scare tactics—act now!—may provoke a

reaction, but do not build a long-term relationship. It is better to stress the

benefits than to evoke worry by dwelling on the what-ifs.

Savvy Consumers

Mature adults have a lifetime of consumer experiences including large

purchases and investments. Baby boomers grew up in an era of flourishing

consumerism and have been immersed in it all their lives. Consequently, these

generational groups are very savvy consumers. The real estate professional

must be able to articulate a meaningful value proposition, back up knowledge

with experience and credentials, and demonstrate expertise.

Plus, there is no one-size-fits-all approach to the market. Expert marketers

attest that the companies that are most successful in winning and keeping

market share among mature consumers are those that offer options for

interfacing—face to-face interaction, email, texting, phone, mail, and social

media.

As Old as You Feel? Forever Young?

Aging is not part of baby boomers’ self-image. The most successful companies

never focus on age; they stress the positive aspects of their products or services.

A good example of this is cruise-line advertising, which delivers the message by

showing mature couples enjoying the cruise-vacation experience or by simply

describing the enjoyment and positive aspects of onboard services, dining, and

entertainment. Savvy marketers realize that mature consumers are good at

discerning choices that are right for them. For example, the Hasbro Company’s

advertisements for the large-print version of Scrabble stresses the ease of using

the product and says nothing about the age or ability of the user.

Social

Do not underestimate the power of word of mouth. Mature adults are more

likely to share negative and positive experiences with friends and family and

consider recommendations from them. Given the importance of personal

referrals when choosing a real estate professional, excellent service and asking

for referrals are paramount in gaining and keeping clients. But the biggest

mistake real estate professionals make when working on a referral basis is

failing to ask for future referrals.

Time to Spare?

Mature retired adults generally have more time at home and, therefore, tend to

spend more time watching TV and reading newspapers than other groups. They

also take the time to look at the direct mail pieces they receive, which makes

direct marketing an effective method for reaching the mature market.

The term “senior citizen” is a big turnoff for baby boomers

who see themselves as forever young.

Exam Question 41


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PROSPECTING STRATEGIES

Sponsor refreshments at a club meeting, bingo game, or bridge tournament.

Sponsor a seminar on any topic of interest.

Provide a speaker for a program.

Show a movie at a senior center.

Volunteer for meals on wheels or provide transportation to medical

appointments.

Let other professionals know that you specialize in mature adult real estate

matters, such as physicians, health care workers, elder law attorneys,

accountants, pharmacists, church or temple staff, golf pros, hair stylists, and

care facility administrators.

Offer no-cost real estate consulting service for mature adults; many

communities offer information services for elders, and you could become

the real estate expert.

Speak at senior communities about moving from one’s long-time home.

Have a downsizing company speak at the same venue to ease the topic of

transitioning.

Supply retirement communities with your handouts for prospective

residents. Use this as an opportunity to develop a relationship with their

senior community.

Post your business card on bulletin boards where mature adults are likely to

gather.

Network with merchants and service providers that target mature adult

clientele.

Get involved with service organizations that tend to have older

memberships, such as Rotary, Kiwanis, American Legion and VFW, Elks,

lodges, and garden clubs.

Purchase a mailing list for zip codes with concentrations of mature adults.

Search local property records for homeowners who have owned the same

property for 10–15 years.

Ask for a copy of a senior center’s mailing list. (Don’t be surprised if the list

is confidential).

Slide 197: Prospecting Strategies

I-Note: LEAD a discussion of marketing outreach methods. DISCUSS some examples from the list and ADD your own examples. ASK students who have tried any of these outreach ideas to share their experiences. INVITE additional ideas. CONSIDER showing examples of good and bad advertisements and communications targeted to seniors.


166

Support and get involved with local politicians who are interested in senior

issues.

Write an advertorial on real estate issues.

Participate in senior-oriented expositions and fairs.

Keep track of where retired people who relocate to your market area move

from and establish a referral contact there.

Get interviewed by the press. Establish your expertise by sending local

media a steady stream of ideas in article or press release format; make sure

the information is substantive and not repetitive. When a reporter needs a

senior real estate source, you will be a likely interview subject.

LAWFUL TARGET MARKETING

By Nan Roytberg

Past Associate Counsel, National Association of REALTORS

Source: Reprinted from REALTOR Magazine with permission of the National

Association of REALTORS.

It’s a well-established marketing principle that narrowing the segment of

prospective customers you want to attract lets you create a more effective

targeted message and ultimately yields you a better bottom line.

But the Fair Housing Act says it’s unlawful to discriminate against members of

certain protected classes in providing real estate services, even if these groups

don’t fit in with your targeting strategy. More specifically, you can’t “make,

print, or publish, or cause to be made, printed, or published, any notice,

statement, or advertisement with respect to the sale or rental of a dwelling that

indicates any preference, limitation, or discrimination based on race, color,

religion, sex, handicap, familial status, or national origin, or an intention to

make any such preference, limitation, or discrimination.”

With these limitations looming over you, how can you create an effective

marketing plan that focuses on one or more parts of the population without

running afoul of the Fair Housing Act? That’s a difficult question—a question for

which we don’t yet have all the answers.

To date, neither the courts nor the U.S. Department of Housing and Urban

Development have provided specific guidance on some of the more gritty, real-

life questions related to this issue: “Is it okay to describe myself as African

American on my website so prospective clients who prefer an African-American

salesperson can easily find me?”

Slide 198: Lawful Target Marketing (next two pages)

I-Note: SUMMARIZE main points on target marketing.


167

Unfortunately, until more guidance is available, the only safe course of action is

to focus your target marketing activities on what’s clearly permissible under the

Fair Housing Act and scrupulously avoid what isn’t—even if it occasionally seems

to put a crimp in your marketing strategy.

What to Avoid

Perhaps the most critical mistake you can make is to base your marketing

decisions on prospective clients’ membership—or nonmembership—in any of

the classes protected by the federal Fair Housing Act or by your state’s fair

housing laws. This means you can’t focus your business plan or advertising

tactics only on Hispanics or Arab Americans and exclude African Americans,

Asians, or Caucasians, for example. Likewise, you can’t market your services

only in Christian-oriented publications or on television, even if you’d prefer to

target only those who want a Christian salesperson. (Note that advertising

restrictions under the Fair Housing Act apply to all forms of print and electronic

media.)

Practitioners who want to specialize in senior housing and issues such as

retirement and reverse mortgages face a similar challenge. Even though you

may legally make customers aware you have special expertise that can benefit

seniors, you must be sure to make your services available to seniors who have

children in their households. And unless a community is qualified as senior

housing under HUD regulations, you must never refuse or forget to show

families with children properties just because many seniors live there. The rule

not to market on the basis of membership in a protected class applies even if

the protected class is one that you belong to. Also note that the Fair Housing Act

makes it illegal for anyone in a brokerage office to be designated as the

associate who automatically services all clients who are of the same ethnic or

racial background as the associate.

Focus on your skills, property

Does that mean then that you can’t let buyers know that you’re fluent in the

language they speak? Not at all. Under the Fair Housing Act, there’s nothing

wrong with marketing yourself as having certain language skills. So long as you

pitch your services to the population at large, not just to those ethnic groups

who speak your language, it’s fine to indicate in your promotions that you speak

Arabic, Spanish, or whatever.

Then prospects can decide to choose you because you share a similar language,

religion, or background, and you’re not choosing them based on some similarity

they have with you.

Strategies

There are other strategies you legally can use under the Fair Housing Act. First,

you’re usually on safe ground if you focus on a property-related niche instead of

a client-related one. A niche marketing plan that’s based on any of the following

property types is perfectly lawful and can be quite effective:


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Fixer-uppers

Condominiums

Single-family homes

Resort housing

Properties in foreclosure

Environment-friendly buildings

Golf course communities

Homes on the historic register

Second, you can focus on individuals’ specific needs that are not covered by fair

housing: relocation, interest in living near particular hobby or sports offerings,

and level of understanding about the buying and selling process. It’s perfectly

lawful, for example, to market to first-time buyers so long as you don’t make

assumptions about the likelihood of any group—such as recent Hispanic or

Asian immigrants—being first-timers.

So, you see, it’s possible to follow the advice of the marketing gurus and target a

niche without violating the Fair Housing Act. But be inclusive in your marketing,

allowing prospective clients to choose whether they want you to represent

them. As for the questions not yet answered by HUD or the courts, play it safe

and abide by clear-cut rules. The National Association of REALTORS® Legal

Affairs department will keep you posted on new information as it becomes

available. Go to www.realtor.org/law-and-ethics.

SIX MARKETING STRATEGIES FOR THE 50+ MARKET Mark Given, CRS, GRI, REALTOR®

My experience has been that mature clients have a sense of respect and loyalty. If you build trust with them they will stay with you. But you can’t just put something in the newspaper, on a billboard, or on a bench. It has to be personal and face-to-face.

Phone Calls—Use the FORD Model

If you have a database of mature clients, they like it if you touch them in a

personal way. When you check on your clients on a regular basis it helps you

build a trusting relationship. I start with a simple greeting, just “Hi, this is Mark

Given.” The next step is to look for common group and I use the FORD model. It

may be hard to talk about occupation when they are retired or dreams when

you don’t know them well. But you could ask what they are doing for a holiday,

or how their family or grandchildren are doing. Next, I state the purpose of my

call, which can be personal or professional. With folks I know well I might say, “I

was just thinking about you,” or “I was just calling to check on you.” Then I try to

end on common ground. I try to be off the phone in 2–3 minutes so that I’m not


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taking up too much of their time, but with some clients, let’s face it, they have a

lot of time. Spend time every day or every week to make these spheres-of-

influence calls. You only need about 50 people to build your business; it doesn’t

take that much time to stay in touch with those 50 people every month. Most

important—no cold calls.

Drop-Bys—Be in the Flow

People will work with people they know, like, and trust, but the next step is

people they are in the flow with. Phone calls are not enough. You need to be in

the flow with people. So, about once a quarter I make a personal visit. I always

call ahead of time. My simple script is, “Hey, this is Mark, I’m going to be in your

direction tomorrow, and I’d like to stop by and see you around 10 o’clock if

that’s okay with you.” When I drop in, I have to be prepared, even if I’m only

staying for 15 minutes, to eat the cookies; the folks who care about you will

have something to share. It’s important for me to also have something to share;

I like to take Hershey’s Kisses. Sometimes if the client has leaves that need to be

raked or grass cut, I’ll send one of my children over to take care of it. My kids

are so used to doing that now that they have really come to love helping out

mature folks. The kindness that you share is always well received.

I also take MLS sheets for properties in the vicinity because mature clients

always like to know what’s going on in their neighborhood with property values.

The MLS sheets give me a chance to talk about that even if they don’t plan to

sell for a long time. If I can drop by once a quarter for 15 minutes, it’s a simple

way to market, and I certainly don’t have to spend a lot of money on newspaper

advertising when I’m engaging prospects personally. Like phone calls, you don’t

have to visit thousands of people.

Direct Mail—It’s Still Effective for Mature Clients

I know a lot of real estate professionals who have stopped doing direct mail

marketing because they think it isn’t effective. But it has always been effective

for me. Mailing pieces to mature clients really works because they look at them,

read them, and often don’t throw them away. I removed someone from my

database one time and when I ran into her several months later she said, “I’m

not getting your cards anymore.” It was amazing. After a long time of contacts

that didn’t go anywhere, I took her off the database, but she appreciated those

postcards and expected them every month. As long as you provide relevant,

interesting information—community news, recipes, trends, a football schedule,

market information—mature clients will be willing to engage with you.

Internet—Make Your Website an Information Source

If you want to engage mature clients online, provide valuable information about

topics such as safety, medical news, aging in place, or a community calendar.

You could link to facilities in your area that design and build for mature clients—


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places they can move to when they sell their home. Think about your

grandparents and the things that would interest them. With boomers, I might

think of what would interest my cousins. If your website becomes a gateway to

relevant information, you become the expert.

Networking—Go Where They Go or Bring the Party to Them

If you haven’t built up your mature-adult business yet, here’s what I would

suggest—go where they go or bring the party to them. It can be anywhere they

go on a regular basis, like a mall where people walk during cold weather. We

have a local fast-food outlet that serves free coffee for seniors every morning

from 6:00 to 6:30 a.m. Ninety percent of the people are there not just to get

free coffee but to socialize. You could go there too. You don’t want to go and

say, “Do you know anybody who wants to sell or buy real estate?” Just show up

on a regular basis with your name tag on. If they become friends with you,

they’re going to start asking you about the market. Then you can start building a

database of folks by just inviting them to receive your newsletter or emailing

them some information and letting them know about your website. And that

can lead to direct mail, phone calls, and drop-bys.

Local speaking engagements have been a success for me. If you can get up the

gumption for public speaking, there are many organizations that are always

looking for speakers with good information. I went to the local chamber of

commerce and asked for a list of organizations that have regular meetings; then

I sent out a notice to let them know I was a local real estate professional and

available to speak. I just gave a market update at a local senior center. About

twice a year I get in front of 40–50 mature clients at this senior center, and I’ve

gained a lot of business from it because I’m seen as a trusted real estate advisor.

Building Referrals—Give Them Something Good to Talk About

I’ve learned that mature clients socialize a lot—they are active and engage in

activities with friends. When clients talk to each other, in particular mature

clients, you have to make sure they have good stuff to say about you. If you are

engaged in all these ways—by phone, mail, face-to-face, and online—you will be

there when they are ready to make a move.


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YOUR VALUE PROPOSITION What does your marketing say about you as a real estate professional, your

specialty, the services you provide, and how you conduct your business?47

Value proposition: Identify the qualities that distinguish you from your

competition and express these qualities in terms of customer services and

value added by your distinctive qualities. This is your value proposition and

promise of customer service.

Repetition: Use this value proposition in all your marketing materials,

website, advertising, and signage.

Logo and tagline: Graphic elements, such as a logo or signature color, and a

memorable tagline stick in a consumer’s mind. Use the same photos on all

your promotional materials.

Consistency: Some make the mistake of tinkering with a personal brand if

they think that results are too slow. This confuses the consumer. Give it

time. Developing a personal brand is a long process.

Commitment: You must be passionate about your personal brand because

creating and sustaining it will take a lot of energy.

Authenticity: Because your personal brand expresses your personal values,

way of doing business, and expertise, authenticity matters the most. Your

personal brand may remain with you throughout your career; it should

become second nature.

Congruence: Your personal brand should be congruent with your broker; a

personal brand that says “luxury property” is a difficult fit if your firm

promotes discount services.

47 Adapted from Resort and Second Home Markets, National Association of REALTORS®.

Slide 199: Your Value Proposition

I-Note: PROVIDE an overview of creating a value proposition for the 50+ market. REMIND students to focus on their skills and the properties (refer to the article on target marketing).


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EXERCISE: YOUR VALUE PROPOSITION—WHY CHOOSE ME?

What is your value proposition for the 50+ market? Think of the services,

expertise, qualifications, experience, and other qualities that distinguish you

from competitors. How would you express these in terms of client service?

Write a tagline (10 words or less) that communicates your value proposition to

mature or boomer buyers or sellers.

SELECT one of the two exercises based on students’ interests. I-Note: Students may complete this exercise working individually or in groups. INSTRUCT students to select a group—mature or boomer buyers or sellers—and begin by listing characteristics that distinguish them from competitors. Then express these in a tagline (10 words or less) that communicates the value proposition to the selected group. ASK students to share their taglines. ADMONISH students not to pilfer others’ ideas, particularly if they are competitors.


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EXERCISE: MARKET OUTREACH

Your instructor will divide the class into groups and assign each group one of the

following groups: boomer seller, boomer buyer, mature seller, or mature buyer.

Write the title of your assigned group at the top of the provided flip chart page.

Answer the marketing questionnaire based on the assigned group and record

your responses on the flip chart pages.

MARKETING QUESTIONNAIRE

Who is your market? Boomer buyer or seller? Mature buyer or seller?

What are they currently buying or selling?

What do they like to do? What are they involved in? Where do they live,

work, and play?

What marketing efforts will be visible where they live, work, and play?

Billboards? Bulletin boards? Flyers?

What events would they be interested in knowing about or participating in?

What type of information would be of interest and helpful to them?

What magazines, newspapers, websites, and other media are they reading

or listening to?

Do you have a presence in these media?

How do they use the Internet?

Who do they rely on for advice and business contacts, and how could you

connect with these people?

What services do you offer that meet these specific needs?

Does your market have special needs?

What services could you offer that meet these specific needs?

Based on the answers to this questionnaire, what marketing activities could

be used to generate leads?

What items and products might they like to receive by mail or in person?

I-Note: DIVIDE the class into groups of 5–7 students each. PROVIDE each group with a flip chart, markers, and tape. ASSIGN each group one of the following groups: boomer seller, boomer buyer, mature seller, or mature buyer. INSTRUCT the groups to answer the marketing questionnaire based on the assigned group and record their responses on the flip chart pages. ALLOW about 15–20 minutes to complete the task and affix the pages to the classroom walls. SUGGEST students take a field trip around the room. INVITE students to move around the room in order to view the pages and write down any ideas that they like.


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SEMINARS AND PRESENTATIONS

Mature, retired adults tend to have a lot

of time available for and interest in

attending events and educational

seminars. Presenting a seminar for clients

in the 50+ age group is a great way to

build your visibility as a real estate

professional and a designee—a Seniors

Real Estate Specialist®. A seminar begins

the process of building a relationship

without making a commitment. Attendees

get an opportunity to get acquainted with

you and check you out. Presenters have

an opportunity to demonstrate their

professionalism and sensitivity to 50+

needs and interests.

Creating a program opportunity

Senior centers, communities, civic

groups, community colleges, and

service organizations, to name a few, are always looking for programming

ideas and interesting speakers. Creating a program opportunity could be as

simple as contacting the organization’s leadership or administration and

offering to make a presentation on a real estate topic. But you don’t have to

wait to be invited as a guest speaker; you can schedule your own seminar.

Scheduling

Schedule the seminar during the daytime; midmorning, around 10 a.m., is

usually best. Remember, many older people cannot or do not like to drive

after dark. An early evening time frame may be okay if the attendees do not

have to drive to reach the location, such as a clubhouse or community

center.

Be sure to have a schedule established for a limited number of speakers.

Each speaker should be able to present their portion in 15–30-minute

increments; a maximum 1-hour time frame is best. Leave time at the end for

attendees to ask questions and gain additional information from the

presenters.

Publicity

Start publicizing the seminar about 6–8 weeks in advance. Take advantage

of free space in media, community bulletin boards, church bulletins, senior

center bulletin boards, public service announcements, and community

newsletters. In addition to inviting the club or community group members,

ask permission to invite prospects on your own contact list and encourage

Slide 200–Slide 201: Seminars and Presentations

Exam Question 42

Presenting a seminar enhances your reputation as a real estate

professional and also provides an opportunity for attendees to

check you out without making a commitment. I-Note: DESCRIBE the

benefits of presenting a senior seminar. EXPLAIN how to approach groups to offer a presentation, choose a topic and other presenters, work with sponsors, select a location, and pick a date and time. CAUTION students that invitations cannot exclude non-seniors from attending, such as families with children; such an exclusion would be a violation of fair housing law.


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other presenters to invite prospects from their contact lists. Invite

attendees to bring a friend.

Location, location, location

The presentation environment should not be sales focused; therefore,

holding the seminar in a real estate office is usually not a good idea. Instead,

choose a neutral, non-sales location, such as a community center, a public

library, or a community room. Look for a convenient location with ample

parking (and access to public transportation in metro areas) and easy

entrance with minimal stair climbing. When picking a date, check if there

are any other community events scheduled concurrently. If your market

area includes a large number of snowbirds, choose a time period when they

are in residence.

Attendance incentives

Think of attendance incentives in terms of encouraging or removing barriers

to attendance. What will attendees value? Items that encourage attendance

could include prize drawings, refreshments, credits toward services, dollars-

off coupons on partners’ products or services, or a free CMA. What barriers

might prevent attendance? Items that remove barriers to attendance could

include free or validated parking, a convenient location where likely

attendees gather anyway, a free breakfast or lunch, or an open invitation to

bring a friend.

If you are looking to build a future database, have the attendees fill out a

card with a few questions and an offer to win a gift certificate, such as $25

at a local grocery store or pharmacy.

Working with sponsors

Sponsors want to reach the same audience that you do and usually for the

same reasons—to gain customers. Sponsors help by sharing costs, providing

expertise as presenters, lending credibility, and offering promotion

assistance. Some sponsors, such as community groups, faith based

institutions, and senior centers, can offer a built-in audience, and you could

gain a reputation as a knowledgeable and trusted real estate advisor for the

sponsor.

A good approach to asking for a sponsor’s support is to start with your

personal contact at the company or organization. If you don’t have a

personal contact, consider asking your broker for help—borrow a contact.

When you make the call or meet with the person, you could say, “I’m

planning a real estate seminar and I expect 20–25 potential clients will be

there. Would you like to partner?” The response will likely be a question

about what partnering involves, so be prepared with specifics, such as

provide meeting space, make a presentation, help with promotion, offer

financial assistance, sponsor refreshments, or provide door prizes. Describe

how the sponsor can benefit from partnering with you and reach the target

Exam Question 43


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audience. Send a friendly note to confirm the sponsors’ support and specify

what they have agreed to do. Be sure to integrate your sponsors' important

deadlines and target dates into your planning timeline.

Working with other presenters

You could ask two or three representatives of your team, such as a lender,

attorney, tax specialist, accountant, or financial planner, to make a

presentation. Presentations by other professionals enhance your standing

as a real estate expert. As a rule of thumb, the number of speakers should

not exceed four, including yourself. Work out in advance the order in which

presenters will speak and each speaker’s time allotment. On the day of

presentation, you can act as the emcee, introducing the other speakers, as

well as making a presentation yourself.

Conferring in advance about topics avoids duplication and contradictory

information. Ask to see other presenters’ handout material in advance; this

will help ensure that the material is appropriate, and examples are relevant.

Keep in mind what your intent is; for instance, when speaking at a senior

community, you wouldn’t want to pair up with a company specializing in in-

home care as this is antithetical to the purpose for which you are speaking.

It’s also a good idea to make sure the other presenters understand the

distinction between a REALTOR® and a licensed real estate professional as

well as the significance of the SRES® designation.

Who is the audience?

Consider who will be in the audience and who needs the information. The

target audience could be the adult children of elders. Any of the topics that

you would present to elders can be refocused to address adult children. For

example, “Helping Your Parents Downsize” or “Is a Reverse Mortgage the

Best Choice for your Parents?”

What to talk about

Think about your target audience’s concerns; what problems do they need

to solve? For example:

Winterizing your home

Easy-maintenance landscaping ideas

Downsizing strategies to lessen physical burdens

Snowbirds—preparing your home of a long seasonal absence

Adapting your home for aging in place

Strategies and services for staying in your own home

FAQs on reverse mortgages

Fears and the emotional impacts of change


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It is crucial to establish trust with the target audience. You can do so by

stressing to presenters and sponsors that the purpose of the program is to

provide information, not a sales pitch. Audience members will immediately

tune out if they perceive that a presenter is trying to promote a company’s

services or products. Assure presenters that their expertise and willingness

to provide objective information will speak more loudly and lastingly than

any sales pitch and result in future customers.

Follow-up

On the day of the seminar, offer a sign-in sheet or sign-in cards. Ask for

contact information, including an email address; put check-off boxes on the

sign-in card for permission to email or call. Use the sign-in cards to draw for

door prizes. Offer a coupon for follow-up service, like a free CMA, a

consultation on preparing a home to sell, or some other service.

Although the seminar environment should not be sales focused, following

up on contacts made at seminars provides an opportunity for you to

demonstrate your expertise and offer helpful services. Because attendees

have already seen your presentation, and perhaps talked one-on-one, you

have accomplished the first step in establishing a relationship.

I-Note: SUGGEST methods for capturing contact information for follow-up. For students who are REBAC members, REFER them to the REBAC website (members-only section) to download a 4-Step Guide for Successful Home Buyer Seminars.


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3-MINUTE BRAINSTORMING CHALLENGE

Topics

What topics would be interesting for

mature adults and their families,

baby boomers?

Sponsors

What businesses and services want

to reach the same prospects?

I-Note: CONDUCT a quick-paced

brainstorming exercise. Students can

work in groups or on their own.

Individually: ASK students to brainstorm

one or more of the challenge topics on

their own for 3 minutes. CALL on

students to share ideas. WRITE

responses on flip chart pages. BUILD the

list by asking for ideas that have not

been mentioned yet. CONTINUE calling

on students until all ideas are listed.

Group: DIVIDE the class into four groups.

ASSIGN 1 challenge per group. ALLOW 3

minutes for brainstorming. ASK the

group to present their ideas in 2

minutes—USE a timer. ALLOW 1 minute

for others to add ideas.

ANNOUNCE a “lightning round”—each

idea must be presented in 10 words or

less. CONDUCT a 1-minute brainstorm of

do’s and don’ts of senior marketing.

CALL on students to share an idea (one

do and one don’t per student).

Presenters

who could you invite to as a

presenter?

Giveaways

What information and items would

be memorable giveaways?

1-Minute Lightning Round: Do’s and Don’ts

Write one do and one don’t—in 10 words or less—for presenting seminars to

the 50+ market.

Do:

Don’t:


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YOUR DIGITAL PRESENCE When someone enters your site, do they know that you focus on the older-adult

market? What does your website say? What information does it offer? Post

articles about senior issues written by you, information about topics of interest

(e.g., information about the uses of reverse mortgages, etc.), and add links to

other websites such as community elder services or local pharmacies that

participate in the Medicare drug plans. Be sure to obtain permission to link to

other sites, and check these links from time to time, about every 4–6 weeks, to

make sure the links are still valid. Some other ideas are:

List your special services to assist mature adult buyers.

Post a call to action—“call me for information about.”

Post photographs of events and parties and send an email to your contact

list with a link to the photos.

Include your website address and a link in all email communications.

Feature a building or service of the month.

Post explanations of the Housing for Older Persons Act.

Post lists of stores, restaurants, entertainment venues, and services that

offer senior discounts.

Make your website a portal for information

about the community.

Provide links to elder services like

Medicare drug plans and

downsizing services.

I-Note: PRESENT ideas for developing a website, social media site, or blog that will appeal to the 50+ market. ASK students to contribute ideas.

Exam Question 44

Slide 202: Your Digital Presence


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What features would make a website, Facebook page, or blog

attractive for the 50+ market?

I-Note: LEAD a discussion of features and content that would be attractive for age 50+ viewers. I-Note: INFORM students of customizable marketing materials available exclusively for SRES® designees at www. seniorsrealestate.com. (Samples shown on next page.)


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SRES® Marketing Support: Exclusively for SRES® Designees at www.seniorsrealestate.com

Customize this trifold brochure with

your contact information.

Customizable posters

Customizable postcards—4 versions in 2 sizes

Banner ads for your website

SRES® Print Shop

The online SRES® Print Shop offers

high-quality professionally printed

marketing materials at competitive

prices. Create and store your own

customized flyers, postcards, and

brochures online. Professional image

enhancement services are available

too. Receive an email notification

when the print job is shipped via UPS.

Go to www.SeniorsRealEstate.com,

sign in, and select Marketing Materials,

SRES® Print Shop.



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Module 11. Working with Buyers and Sellers

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As we learned in the previous chapters, most in the 50+ age group are currently

homeowners, and their housing needs and preferences will change as they

retire and grow older. As needs and preferences change, many will sell and buy

several times. Whether downsizing, pursuing a new lifestyle, or moving to a last

home, each of the transitions has different issues and service needs. As 50+

clients move through life phases, the real estate professional has an opportunity

to gain a series of sell and buy transactions. How can the real estate

professional continue to benefit from this stream of transactions? In the

previous chapters we looked at methods for reaching out to prospects and

building relationships. In this chapter, we’ll look at providing the services and

demonstrating the sensitivities that win client loyalty and referrals.

In preceding chapters we examined the motivations for making a transition as

well some of the obstacles that stop older homeowners from making a move.

The material that follows focuses mainly on overcoming obstacles because

these present some of the most challenging situations for real estate

professionals working with mature clients and their families. But it’s important

to realize that not every 50+ seller or buyer, even those advanced in years, is

apprehensive about making a transition.

PROVIDING ASSURANCE Thinking back to the discussion of obstacles that keep people from making a

move, perhaps the most important thing a real estate professional can do for an

apprehensive client is to provide assurance:

Assure the client, family, and caregiver that whatever the concern or worry,

others have faced similar situations, completed the transaction, and made a

successful transition.

Describe how others have solved problems, overcome obstacles, and made

a successful transition.

Provide information on your resource team and the services that are

available to assist in the transition.

Describe your business philosophy and experience as well as your skills and

services.

What other ways can you think of to reassure an apprehensive client?

I-Note: OBSERVE that not everyone is apprehensive about making a transition. DESCRIBE how the real estate professional can reassure an apprehensive client. ASK students how they reassure clients.

Slide 204: Providing Assurance


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CASE STUDY: ON THE GO

Richard and Norma are making the most of their retirement years. Richard plays golf a couple of times a week, builds furniture in his woodworking shop, volunteers at a local hospital, delivers meals on wheels, and keeps in touch by email with a large network of friends. Norma enjoys trying new recipes, painting and crafts, tending her herb garden, and socializing

with a “Red Hat” group. Together they love to travel, attend theater performances and sporting events, and entertain friends. Their travels include trips to visit family and vacations with the grandchildren at beach resorts and Disneyworld. Their longtime home, near Cleveland, is spacious but also chock-full of a lifetime of accumulated stuff including their children’s childhood memorabilia. Photos documenting family celebrations and accomplishments cover every inch of wall space. Richard and Norma have always dreamed of living in a warm climate and they both agree that a smaller home with fewer maintenance demands would be best; they really want to be able to “lock the door and leave” without worry. They asked their real estate professional, Adele, to talk with them about selling their current home and relocating to an active community in a warmer climate. Norma confided to Adele that sorting through all the stuff and deciding what to move, keep, discard, or give to the kids was almost overwhelming.

What are the issues involved with this case study? Do Richard and Norma seem

apprehensive? What could you do to help them make the transition?

I-NOTE: Issues: Staging the property and dealing with all of the stuff in the home. Possible solutions: share ideas on how others have handled similar situations.


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THE FORD INTERVIEW

A distinguishing characteristic that makes your presentation memorable is the

way you go about building rapport. Small talk breaks the ice and helps prospects

get comfortable as you describe your services and brokerage relationships. If

the presentation is made in the client’s home, look for visual clues such as

photos, awards, paintings, embroidery, a piano, or sports equipment near the

door, for clues about their interests. A handy way to remember questions to ask

is the acronym FORD. You can ask about:

Family and friends

Occupation

Recreation and hobbies

Dreams and goals

It may be insensitive to ask retired or elderly clients about their occupations or

dreams, but almost everyone has a favorite pastime. Photos of family and

friends and mementos provide potential conversation starters too. Also, how

you ask is as important as what you ask.

During the conversation, you can learn important information such as the

client’s life stage, recent real estate experience, family involvement, and other

factors. Concerns with the transaction will surface, providing you an opportunity

to describe your services and special skills and knowledge.

Slide 205: The FORD Interview

Exam Question 45

Exam Question 46


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EXERCISE: FORD INTERVIEW Your instructor will divide the class into pairs. Working with your assigned

partner, take turns interviewing each other using the FORD model. First, one

person assumes the role of the prospect and the assigned partner assumes the

role of the agent; then switch roles. What are some questions that should be

asked during an interview with a mature adult buyer or seller? How could you

phrase sensitive questions to demonstrate interest without intrusion?

THE BIG QUESTIONS

The real estate professional may need to ask probing questions and interpret

answers to get at the true meaning of statements. For example, the statement

“I want a ranch house” may really mean a one-level property with no stairs. A

condo in an elevator building may meet this need with the added bonus of none

of the upkeep of a single-family home. A statement like “I’m not interested in a

senior community” may express a preference to be in a community with people

of all ages—children, families, middle-agers, and elders. Specialists report that it

is not unusual for a buyer to be precounseled on the Internet and come to the

counseling session with a list of needs, wants, and desired properties. Do not be

afraid of suggesting alternatives that might be suitable; the client may not be

aware of the options.

When working with mature adults it may be appropriate to ask questions and

raise issues that would not come up with younger clients. For example, if the

reason for selling is to enter a nursing home, Medicaid eligibility may be a

factor; assisted living or home health care may be a workable alternative.

I-Note: DIVIDE the class into pairs; pair each student with someone they do not know. INSTRUCT the groups to take turns interviewing each other using the FORD model. First, one person assumes the role of the seller and the partner assumes the role of the agent; then switch roles. ALLOW about 10 minutes for the role playing. ASK students how to phrase some sensitive questions.

Slide 206–Slide 207: The Big Questions


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Questions might include:

Is this an interim or transitional move?

How does this purchase fit into future plans? Is it a second home that may

become a primary home in the future? A transition home to be sold at

retirement?

How do you feel about making this move?

What are the top 10 things you want, or never want, in a home?

Are there special needs or property features to consider?

Will the neighborhood meet your needs for transportation, grocery delivery,

meals, and medical?

Do you do your own housekeeping and gardening?

What form of communication do you prefer? Phone? Email?

Is there another family member involved in the decision?

Would you like to know more about the financial options available?

Do you currently have a reverse mortgage?

Will the move impact long-term health care coverage?

In the case of an estate, has the estate been probated?

Ask Yourself:

What are the concerns, priorities,

and time frame of these clients?

Why would the clients do

business with me?

How can I earn and maintain their

respect and trust?

How can I work best with the decision-making processes of the clients,

family members, or caregivers to produce a successful transaction?

I-Note: DISCUSS strategies for learning a client’s wants and needs. CAUTION students against making assumptions based only on age. PROVIDE examples of questions to pose.

Slide 208: Ask Yourself


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EXERCISE: THE REAL MEANING

What questions might you ask to probe the meaning behind these statements

and learn more about the client’s concerns?

My kids want me to rent a senior citizen apartment, but those are full of old

people.

I want my privacy.

I want a house where we can lock the door and go!

There are so many memories in this old house—it’s hard to leave those

behind.

My sister-in-law moved into one of those senior communities and she just

loves it. It might be right for me.

Some stairs are okay, but not too many.

What do people do there to keep busy?

My wife is really into crafts, so we need a room just for her craft projects.

Will that development let my grandchildren stay for a visit?

My kids want me to sell this big old house and move to something smaller.

What do you think?

If my husband was still here, he’d know just what to do. I’m not so sure.

UNDERSTANDING NEEDS AND CAPABILITIES Specialists attest that it is helpful to profile clients by where they fall on a

maturity and activity continuum.48 Although chronological age provides a clue to

an individual’s needs and capabilities, it doesn’t tell the whole story. As noted in

the discussion of understanding how we age (see page 28), functional age—

cognition, mobility, impairments, chronic conditions—matters more than the

number of years in determining needs, wants, and abilities. Although when a

major or sudden life change necessitates a change in living arrangements, the

emotional impact can be as debilitating and limiting as a physical illness. The

real estate professional must remember that working with the 50+ market,

especially the very elderly, requires sensitivity and empathy. You can create

your own needs and wants tool based on the checklist on page 60. Develop this

checklist for your own market area and use it to find out needs, wants, and

priorities as well as activity level.

48 Remember that the Fair Housing Act prohibits discrimination on the basis of handicap; do not try to decide what is appropriate for disabled clients—they should decide.

I-Note: This exercise may be presented as a group activity or an instructor-led role play. Group activity: DIVIDE the class into groups. ASK each group to discuss one or two of the statements and formulate questions. ALLOW approximately 10 minutes for the groups to formulate questions and ASK each group to present the questions to the rest of the class. Instructor role play: INFORM students that you are a mature adult client and they are real estate professionals. PRESENT each of the statements and ask students what questions they might ask to uncover the deeper meaning of the statement.

Slide 209: Understanding Needs and Capabilities


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VIEWING AND SHOWING PROPERTIES

Viewing Properties

Realize that elders may not have the physical and mental stamina for a full day

of property viewing or a lengthy counseling session. It may be best to schedule

several short appointments instead of one long one.

Memorabilia Everywhere!

Mature adults’ homes often wind up as repositories for a lifetime of family

memorabilia and bric-a-brac. Every item recalls a cherished memory and the

senior owner knows where everything is. But real estate professionals know

that a house packed with too much clutter will not show well. A prospective

buyer will have a hard time looking past the clutter of all those memories. What

can a real estate professional do?

Tact and patience are essential when advising an elderly seller on how to stage

the property for showing. The sale of a long-owned home is an unsettling

experience on its own without adding the upset of disturbing or removing

objects that represent the homeowner’s memories. Therefore, it may be

necessary to show the home a couple of times in its cluttered state before the

owner can see the benefit of packing some things away. You could say, “The

house might show better if some things were packed and stored.” Or, “Would it

be a good idea if we started packing some of your things?” Or, “I’m concerned

about your… collection and about breakage when showing the house. Would it

be okay to pack some of the collection?”

As-Is Properties

An as-is property can need a lot of repairs. A home that has been lived in for

many years may have deferred maintenance issues. The owners may not have

the ability, financial resources, or motivation to keep the property up. Or, they

may not be aware of or see the need for repairs or maintenance. They are just

trying to live out their life in the home without investing any more in it. In some

cases, even an as-is property may need repairs before it is ready for sale. A

home equity loan to pay for repairs may be a solution; the loan balance can be

paid off with the sale proceeds. If the owners want to stay in the home but lack

the money to repair it, a reverse mortgage may be the answer.

Showing a Property with the Homeowner Present

It may be difficult for an elderly or mobility-impaired homeowner to leave a

property for showings. The real estate professional may have to go the extra

step of finding a place, like a neighbor, for the homeowner to go during

showings. On the other hand, some experienced specialists say that homes can

be shown with the homeowner present. A notation in the MLS remarks (such as

Slide 210: Viewing Properties I-Note: REFER students to the checklist on page 60. EXPLAIN how it could be used as a checklist for assessing buyer’s needs and wants as well as activity level.

I-Note: RAISE awareness of important sensitivities when working with senior clients. REFER to “How We Age” (see page 28).

I-Note: COMMENT on the tendency for elders’ homes to be filled with memorabilia.

Slide 211: Memorabilia Everywhere!

Exam Question 47

Slide 212: As-Is Properties

Slide 213: Showing Property with the Homeowner Present


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“seller may be present at time of showing”) alerts other agents that the

homeowner may be present when they plan to show the property. The

practitioner can reassure the homeowner that the home and their personal

property will be safe during showings; it may help if a family member or

colleague remains with the elder during the showing to provide emotional

support and report progress.

SENSITIVITIES

Patience

When asked about working with mature and elderly clients, experienced real

estate professionals say have patience, patience, patience and expect more

handholding through the entire process. Decisions can take a long time and

lengthen the sales cycle. If an elderly client has a physical condition like short-

term memory loss or hearing or vision impairment, it may be necessary to

repeat information and divide explanations of complex processes into smaller

steps. Matters such as disclosures and inspections can cause a lot of confusion

and misunderstanding too. Focus on counseling the client, not selling; a hard

sales approach could be perceived as taking advantage of an elderly person

even if your advice is the right course of action.

Empathy

The client may be suffering a great deal of emotional distress, such as grieving

the loss of a spouse, friends, or family members, or even a beloved pet. A

change in health can impair hearing, eyesight, cognitive ability, or mobility and

learning to deal with a sudden loss of ability involves a similar mourning

process. Even moving out of a long-owned home can involve a mourning

process as personal attachments to people, places, and things are severed. The

loss of a spouse or life companion is particularly devastating. A couple may have

bought the house together and spent a lifetime making it their home, but now

the survivor must sell the house on his or her own. The financial or household

decision maker may be gone, leaving the survivor uncertain of what to do or

how to accomplish even everyday tasks.

Communications

What should a real estate professional do when an elderly client calls every day

or several times a day? You should respond with patience and remember the

Golden Rule. Understand that the elderly client may not have anything else to

occupy time and the real estate transaction is likely causing stress and worry.

Experienced specialists handle this situation by managing expectations, such as

setting a date and time for the next phone call to the client. If you will be out of

town, change your voice mail message every day so callers know where you are,

when you will return, and when you will return phone calls.

I-Note: DISCUSS issues of showing as-is properties and showing a property with the homeowner present.

I-Note: STRESS the importance of patience and empathy.

Slide 214: Patience

Slide 215: Empathy

Slide 216: Communications

I-Note: OFFER ideas for facilitating communications.


193

On the other hand, keeping in touch with active mature adults who are

constantly on the go can present some challenges for the real estate

practitioner. Retirees may leave on a spur-of-the-moment trip and not inform

the real estate professional that they are leaving or provide contact information.

Retirees do not have to worry about scheduling time off from a job. They are

free to go when they please and do not feel a sense of urgency about business

matters.

Although attitudes are changing as tech-savvy baby boomers move into

retirement years, some elders do not use mobile phones, voice mail, or email.

Ask if the client uses email or has a smart phone. Be aware that many seniors

turn on mobile phones only when they want to make a call.

Have the seller provide a point of contact who can to reach them if you are unable to do so. Although rare, you may also consider providing a prepaid mobile phone to a client who does not have one so that they can call you or receive a call directly from you. Make sure the device is simple to operate, such as one-button play back. Do not call too late in the evening (after 9:00 pm); many elders are early to bed and early to rise.

Documents

Large-print copies of documents are a great help. Even mature adults without

obvious vision problems appreciate documents with large print. A quick way to

make a large-print version of a document is a photocopy enlargement; keep a

stock of 11x17 paper in your office for photocopying enlargements. The clients

can sign the small-print version of documents. If you are working with a couple

or family members, prepare extra copies of everything so each person can have

a copy. Develop a large-print version of your business card, too. You can also

keep a magnifying glass or page-size magnifier handy in your desk and car. A

penlight provides extra illumination and can sharpen focus.

Comforts

An office setting that is comfortable for mature adults will also be comfortable

and inviting for younger clients and customers. Chairs with arms are easier to

stand up from. Low couches and easy chairs can present problems. Refer to the

universal design standards on page 62 and evaluate your office setting in

relation to those principles.

Closing

Mature clients expect the real estate professional to be present at closing as a

support and to explain what is going on. It may be necessary to go the extra step

of driving the client to the bank and the closing.

Another option is pre-signing. In most instances, the real estate professional,

the seller, and a representative from the title company will meet at the new

(Next page) I-Note: ASK students to identify the issues involved in this situation. ASK how they would handle this situation.

Slide 217: Documents

I-Note: DESCRIBE ways to share documents and make the office environment more comfortable. CALL attention to aspects of low vision.

Slide 218: Comforts

I-Note: COMMENT on the importance of being present at closings.


194

home of the senior to complete the pre-signing for the property. The seller will

then provide the necessary funds via a deposit slip to the closer, a check for the

real estate professional to deliver, or wired means. Providing this option enables

your senior client the ability to avoid traffic and other obstacles the day of

closing.

Senior specialists say that this little bit of extra service may mean the difference

in keeping the client because the future business is lost if the practitioner is not

at the closing.

Low Vision Assistance

Low vision is more common than blindness and less obvious to the observer.

Glaucoma, cataracts, and macular degeneration are leading causes of low

vision. You can help clients who have low vision by:

Announcing your presence and identifying who you are.

Describing what you are doing.

Uncluttering the area.

Putting objects back in place if you move something in the home.

Speaking directly to the person but not yelling because low vision has

nothing to do with hearing.

Offering assistance but not insisting.

Providing low vision aids, like a magnifying lens or page magnifier.

Knowing how to be a sighted guide; offer your arm, walk a half step

ahead so your movements can be sensed, and speak up when

approaching stairs or curbs. Never grasp or push the person in front of

you.


195

Case Study: Gordon and Juanita

Ten years ago, Gordon and Juanita purchased a one-bedroom condominium

in a senior development along Florida’s Gulf coastline and settled in to enjoy

winters in Florida. A couple of years later, they purchased a second larger

condo in the same building with the expectation of flipping it and using the

gain to pay off the mortgage on the one-bedroom unit. The second condo is

currently listed with a real estate professional. Things have not worked out as

they had planned. When Gordon and Juanita purchased the second condo,

there were only two other units available in the building; now there are 26

units listed, property values have fallen, and it is a buyer’s market. Then

Juanita passed away suddenly. Now Gordon is left with carrying costs and

mortgage payments on three properties, including the family home in

Philadelphia, which he would never consider selling. Gordon, in his grief, is

confused, lost, and completely distraught, and he has been calling his listing

agent two or three times a day to ask for advice. Gordon’s two daughters,

who live in the Philadelphia area, have not been involved in the parents’ real

estate dealings or financial affairs until now, but they are very supportive of

their father and want what is best for him. What are the issues involved in

this scenario? If you were Gordon’s real estate professional, what would you

suggest?

I-NOTE: Issues: Cost of carrying three properties; buyers’ market'; Gordon’s grief; involvement of family members in decision making. Possible solutions: List both condo units and see which gets the best offer. Offer to sell one of the units with seller financing. Raise the commission rate to create an incentive for others to show the property. Consider a reverse mortgage on the primary residence. With the father’s consent, schedule a conference call with the daughters; they may be able to help him make a decision. Be sensitive, compassionate, and patient, but stay focused on the transaction.


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INVOLVING FAMILY MEMBERS

Involving family members or people who are like family can be a big help for

both the client and the real estate professional, especially when a client’s

physical and cognitive capabilities are weakened. A family member can interpret

information, locate and keep important documents, meet deadlines, confirm

appointments, and help the elder through the transition. Refer to the earlier

discussions of handling confidential information (page 147) and power of

attorney (page 149). Remember that the real estate professional must obtain

permission from the client before sharing confidential information, even with

family members, and should verify that family members have authority to make

decisions.

If other family members are involved in decision making, it is important to build

relationships with them too. Include family members in discussions and

decisions if appropriate and if the client wants to include them. If children live in

another city, schedule a conference call with them and the elder parent. You

can make them part of the team that is able to communicate and help elders

make decisions and take actions. With the client’s permission, help family

members by having extra copies of documents available.

Staying Out of Family Conflicts

When an elder’s property is involved in a transaction, specialists report that

adult children often make the first contact with the real estate professional to

request a CMA or view properties. Of course, in many cases the adult child is

acting with the knowledge and consent of the elderly parent. In other situations,

this initial contact can signal the beginning of an entanglement in a difficult

family situation.

It’s important to realize that, even with the best of intentions, family members

can have different goals. For example, an elderly homeowner may be most

concerned about maintaining independence and privacy while the children are

concerned about the parent’s safety. Family members react differently too. A

mature homeowner may be looking forward to freedom from home

maintenance, but the children resist the sale of a family home because it breaks

an emotional link to cherished childhood memories. When one sibling takes the

lead, old rivalries can resurface. In all these instances, the signals may be quite

subtle and unspoken.

What should the real estate professional do to provide services without being

drawn into family business?

Stay focused on the transaction and the client

It is important to be aware of sensitivities but remember that it is a business

transaction. Keep interactions with the senior and family members on a

professional basis by explaining the transaction process and managing

I-Note: ASK students to share positive and negative experiences with an elder client’s family. ASK if the family helped or hindered the transaction. What actions did the real estate professional take? MAINTAIN a constructive tone during the discussion.

Slide 219: Involving Family Members

Slide 220: Staying Out of Family Conflicts


197

expectations. Be prepared for closing delays if families are working through

conflicts.

Be professionally friendly

It is easy to be drawn in with elders who need emotional support or

someone to talk to. The extent of the relationship may be greater with an

elderly person than with younger and more active individuals. Be

professionally friendly but not the best friend. Also, be careful when

accepting gifts from elderly clients; it may be perceived by the families as

taking what is rightfully theirs.

Case Study: A New Home for Dad

Raymond, an elderly father of three sons, owned a house and an adjoining

property next to a growing subdivision. After suffering a bad fall at home, he

agreed with his three sons that it would be better to live closer to one of

them. They asked a broker to list the properties. A builder made an offer of

an amount of cash plus construction of a new home for Raymond on the

oldest son’s land in trade for the father’s properties. It seemed like a good

solution; Raymond would live next door to the oldest son in a new home.

However, a family squabble arose when the two younger brothers realized

that the older brother’s property value would be increased by the

construction of the new home. Now, the younger brothers are putting

pressure on their father to stall the deal because they see the older brother

benefiting more. The oldest brother has stated that he does not expect to get

anything out of the deal and, besides, he is the one who has always taken

responsibility for looking after their father. Raymond is suffering from the

stress of conflict between his sons. He thinks the solution might be to just sell

his property and move into a senior-living apartment. In the last voice mail

message left with the broker, the builder said he needs an answer soon or the

offer is off the table. What are the issues involved in this situation? How

would you handle the situation?

Issues: Estate planning if the father no longer owns the home, family conflict and finding out what the father really wants to do, and potential value increase for older son’s property. Solutions: Recommend involvement of an estate planning professional, do two appraisals on the oldest son’s property before and after construction, and keep the new house title in the father’s name to preserve heirs’ value.


198

RECOGNIZING ELDER ABUSE AND NEGLECT

Elder abuse and neglect is a sad reality. The National Center on Elder Abuse

(www.ncea.aoa.gov) estimates that up to two million elderly people are victims

of abuse, neglect, exploitation, or mistreatment by someone, such as a

caregiver, spouse, partner, or an adult child. For every case of reported abuse,

about five more cases go unreported. The abuse, which usually happens in the

home, can be physical, emotional, or psychological harm, neglect (intentional or

unintentional), or financial exploitation. Warning signs are:

Threats of force, exposure to weather, inappropriate use of drugs, food

deprivation, abandonment

Verbal or nonverbal acts that inflict mental pain, fear, anguish, breaking or

stealing treasured objects, ignoring the elder, humiliation

Inadequate water, delayed medical treatment, lack of assistance with

eating, not attending to personal cleanliness needs

Withholding basic emotional support, respect, or love, ignoring calls for

help, lack of assistance in helping the elder do things he or she likes and

requests to do

Self-neglect, ignoring personal hygiene, oblivious to weather, compulsive

hoarding

Sexual contact without the elder’s consent

Financial exploitation, taking, misuse, or concealment of funds, property, or

assets

Health care fraud, under medicating, overcharging, kickbacks for referrals,

or substituting less expensive medications

Strained or tense relationships, frequent arguments between the caregiver

and elderly person

Sudden changes in behavior or financial situation, injuries, and bruising

If you suspect abuse, report it to the appropriate authority. HelpGuide.org

(https://www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm)

provides a detailed listing of elder abuse warning signs. Print out the list of

warning signs and put it away in the trunk of your car or an office file, along with

the elder abuse hotline numbers in your state (all states have a reporting agency

for domestic or institutional abuse) or area. You will have an easy reference

when your eyes, ears, or instincts tell you that something does not seem right.

Slide 221: Recognizing Elder Abuse and Neglect

I-Note: PROVIDE an overview of elder abuse and warning signals. ENCOURAGE students to be aware of the issues and know how to report suspected abuse. ADVISE the state or local area contact for reporting.

Exam Question 48

https://www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm


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SCHEMES AND SCAMS

Perpetrators of scams and high-pressure sales operations often target the

vulnerable elderly. Real estate professionals can help by alerting clients of scams

and speaking up when they suspect someone is at risk.

Cash As-Is

Seniors may receive a cash as-is offer from an investor. Many times, these

types of investors will offer around 30 cents on the dollar of a given

property value. While it may be tempting for the seller to accept an all-cash

offer, it's often not the best option available.

Deed Scams

Seniors whose properties are owned free and clear may be susceptible to a

form of deed scam. A fraudulent deed is filed, and the home is sold without

the senior owner’s knowledge.

Cons

A con artist may try to persuade a senior to withdraw money from an

account in order to prove that a bank teller is stealing money from

depositors. Another scam involves asking for bank account numbers and

personal information by phone in order to verify information.

High-Pressure Sales

Boiler-room operations that sell living trusts frequently target the elderly.

The purchaser pays several hundred dollars or more for a package of

preprinted forms. High-pressure sales of home refinancing charge hefty

service fees for unnecessary home loans.

Phony Home Repairs

Con artists often appear after natural disasters like hurricanes. They pose as

contractors and offer home repairs at bargain rates. The repairs are poor

quality or never finished, and the contractors disappear with money paid in

advance.

Fraudulent Mortgage Notices

A sales pitch for refinancing or other products masquerades as an official

document stating, “call for important information about your mortgage

payment.” Another scheme is a phony official notice that a mortgage has

been transferred and future payments should be sent to a fraudulent lender

at a new address.

Wire Fraud

The victim receives an urgent email impersonating the real estate

professional or some other person involved in the transaction. The email

appears legitimate and instructs the recipient to quickly wire funds to the

scammer’s bank account in order to secure the transaction. In most cases,

Slide 222: Schemes and Scams

I-Note: DESCRIBE schemes and scams. SHARE additional examples from your own experience and INVITE students to contribute examples.


200

by the time the fraud is discovered, the scammers have withdrawn the

wired funds and closed the account.

Social Security Scams

You can help clients and customers be on the lookout for these scams that start

with contact—phone, letter, or email—from a scammer claiming to be a Social

Security Administration employee.

Phony Cost-of-Living Adjustment

Victims are informed that the Social Security Administration has noticed

that they have not applied for the annual cost-of-living benefit adjustment.

The “helpful” reminder warns that they must act fast to meet the

application deadline and offers an application form or directs victims to a

phony website which collects bank account and identification information.

Social Security Card Suspended for Suspicion Activity

The victim is informed that the Social Security Administration fraud-

detecting computer system has detected suspicious activity on the victim’s

account. The scammer asks if the victim recently rerouted payments to a

bank in a different state. The scammer says the problem can be fixed if the

victim acts quickly and provides bank account information and other

identification information.

Phony Computer System Hack

A phone call informs the victim that the Social Security computer system

has been hacked and the victim must provide bank account and

identification information so that the Administration can identify

compromised accounts. The scammer knowingly supplies misinformation,

which the victim is then asked to correct.

Out-of-Date Paper Social Security Card

The scammer informs the victim that no further benefits can be paid until

the victim’s old paper Social Security card is replaced with a new, chip-

enabled card. The scammer offers to expedite replacement if the victim

provides identification information including Social Security number.

DATA SECURITY PLANNING

Real estate professionals often collect a lot of personal information about

clients and customers in the course of finding the right home. In this age of

digital recordkeeping, your office policies should include standards and

procedures for collecting, sharing, destroying, and protecting customer and

client information.

Exam Question 49


201

The Federal Trade Commission recommends five key principles for a sound

data security program:

1. Take stock: Know what personal information is in office files and computers and who has access.

2. Scale down: Keep only what is needed for business.

3. Pitch it: Properly dispose of information that is no longer needed.

4. Lock it: Protect the information that is kept.

5. Plan ahead: Create a plan to respond to security breaches.

NAR offers a free Data Security and Privacy Toolkit to educate real estate agents and brokers, associations, and MLSs about data security issues. Download a copy at www.nar.realtor/data-privacy-security/nars-data-security-and-privacy-toolkit. As part of the ePro® Certification program, NAR offers a one-day classroom course on data privacy and security, Data Privacy: Protecting your Clients and Your Business.

EMOTIONAL IMPACT ON THE REAL ESTATE PROFESSIONAL

Specialists sometimes find that they have become best friends for the elderly

clients who rely on them for advice. Numerous phone calls for a variety of

reasons can draw the real estate professional into personal involvement. If a

senior is not in touch with family, the real estate professional may be the only

dependable person they know. Extra care is needed to balance customer service

with agency obligations if the elder is not the client. Elderly buyers and sellers

almost always think of the real estate professional as their agent, regardless of

the agency relationship. Protective instincts can lead to treating the elderly like

children. Specialists warn that when this happens personal involvement is

beyond the bounds of a business transaction.

Slide 223: Emotional Impact

I-Note: AKNOWLEDGE that practitioners must guard against getting too emotionally involved. REFER to the bullet points on page 197.


202


203



204


205

BUILDING YOUR TEAM

Access to a team of experts who can provide expert advice is a valuable asset

for real estate professionals who want to specialize in the mature adult market.

Not only do you and your clients have access to valuable knowledge and

services, other professionals may refer business to you. It’s a fact that one of

the best ways to extend your own network is to become part of others’

networks. Social networks like Facebook and LinkedIn make it easier than ever

to maintain and grow network connections. As mentioned in previous chapters,

your older clients may not use social media, but younger family members

probably do. In this chapter, we’ll look at the other professionals you may need

on your team including some services that may be new to you. We’ll also look at

how to select team members who are sensitive to working with mature adults

and in sync with your service philosophy.

Who Should Be on Your Team

The team should include experts who provide solutions to the challenges and

issues involved in making a major life transition and aging. Some roles are

obvious, like an elder attorney, housekeepers, or meals on wheels. But others

involve services that are perhaps not as well known, like pet placement, art and

antique appraisal, or senior concierge, to practitioners who do not specialize in

the 50+ market. A checklist of possible team members appears on page 205.

Vetting Potential Team Members

Team members should share your mindset and sensitivities toward providing

services for mature adult clients. Some specialists recommend personal

interviews with potential team members to gain a sense of their helpfulness and

respect for mature adults.

Look Around Your Community

Spend time learning about what your community has to offer. Use the checklist

on page 60 to help research services. Specialists advise that you keep an open

mind, especially if you are not a mature adult yourself, and look at your

community through the eyes of an older person.

Slide 225: Building Your Team

Exam Question 50

Slide 226: The SRES® Team (next page)


206

The Seniors Real Estate Specialist® Team

Property Legal and Financial Personal

Termite inspector

Painter

Landscaper and

gardener

Pool service

Snow removal

Home inspection

Emergency board-

up

Disaster preparation

and recovery

Mover

Handyman

Electrician

House sitter

Certified Aging in

Place Specialist

Clutter reduction

expert

Interior decorator

Interior staging

specialist

Storage facilities

Housekeeping

service

• Charities that

accept donations of

furniture, clothing,

and household

items

Home warranty

service

Elder law attorney

(wills, trusts,

estates)

CPA or money

manager

Financial planner,

expert on pensions,

IRAs, 401(k)

accounts, etc.

Estate liquidator

Escrow company

Title company

1031 exchange

specialist (qualified

intermediary)

Tax specialist

Reverse mortgage

lender

Reverse mortgage

counselor

Insurance agent

Document

shredding

Home health care

agency

Community service

contacts

Transitional services

contact/coach

Grief counselor

Elder abuse

resources

Ombudsman

Hospitals and clinics

Public benefits

office

Health care facilities

and levels of care

Community

resources

Meals on Wheels

PACE program

Veterinarian for pet

care

Pet boarding

Dog walker

Pet adoption

Auto repair and

donations

Transportation

services

Volunteer

opportunities and

services

Estate sale

organizer

Art and antique

appraiser


207

MORE SERVICES

Senior moving managers

These professionals specialize in assisting older adults and their families

with the emotional and physical aspects of relocation. For information and a

moving manager locator, go to the National Association of Senior Move

Managers at www.nasmm.org.

Senior concierge services

These service providers help mature adults maintain independence by

offering a range of nonmedical personal assistance from running errands to

providing transportation to medical appointments to participating in

recreational activities. Some offer transitional services to facilitate the move

between treatment and care facilities. Search the web for elder concierge

services in your area.

Junk removal

When accumulation or hoarding has overwhelmed a property or

homeowner a junk removal specialist may be the answer. These service

providers specialize in junk removal from properties like homes, garages,

and storage lockers. Some also remove junk autos. Search the web for junk

removal specialists in your area.

Pet placement

Pet placement services specialize in rehoming pets, including senior dogs

and cats, and can help a pet owner through the difficult decision to

euthanize an ill dog or cat. Search on the Internet for pet placement

services.

Foster care

Adult foster homes are private homes with family-style living, offering room,

board, and round-the-clock physical care.

Adult day care

Adult day care centers provide social and some health services for adults

who need supervised care in a safe place outside the home during the day.

They can also afford a respite for caregivers. For information on services,

visit the National Adult Day Services Association website at www.nadsa.org.

Driver rehab

Occupational therapists who specialize in driver education can assist in

restoring driving skills and evaluating the road-worthiness of elder drivers.

Go to the website for the American Occupational Therapy Association at

www.aota.org/older-driver or the Institute for Mobility, Activity, and

Participation at http://driving.phhp.ufl.edu.

Slide 227: More Services

I-Note: DESCRIBE services for mature adults. AUGMENT the list with your own example. INFORM students of community-based service providers. AVOID endorsements of private service providers.

http://driving.phhp.ufl.edu/


208

Medical equipment loan

These community-based services loan basic medical equipment, such as

wheelchairs, walkers, crutches, canes, and bathroom safety items. Search

the web for the closest medical equipment loan service.

Volunteer matching

Volunteer match services connect people who want to offer their time and

talent with organizations who need assistance. Go to Volunteer Match at

www.volunteermatch.org or search the Web for local volunteer matching

services.

Energy and utility assistance

Many communities offer utility payment assistance for low-income seniors.

Search the web for senior utility assistance.

Bill payment and checkbook balancing

Many community-based organizations and senior centers offer this service.

Senior dating and companion match-up

A search on the Web for senior dating provides a long list of services that

specialize in matching up seniors for companionship, travel partners, or

romance. Some of the largest services are AgeMatch.com,

SeniorFriendFinder.com, and SeniorMatch.com.

Employment services for older workers

These services specialize in matching older workers with job opportunities

and help employers tap the 50+ talent pool. Go to RetiredBrains.com or

SeniorJobBank.org.

Finding an Elder Law Attorney

All state bar associations maintain websites through which attorneys may be

located. Go to the website for your state; find the website by typing [state] bar

association in the browser’s search bar. Look for specialists in particular areas,

such as senior, elder, living will, advance directives, durable power of attorney,

or estate planning.

ORGANIZING A RESOURCE FILE

Start compiling an information file of resources and services. This file can be a

marketing distinction and an offer an edge on your competition. Use the

following suggestions on categories of resources to start researching and

building your customized resource bank.

I-Note: INFORM students of the Web address and telephone number of the bar association within your state.

Slide 228: Organizing a Resource File


209

Active adult developments:

Develop an information sheet for each facility with amenities, range of

housing options, age restrictions, association fees, homeowners association

contact, building manager, and association rules.

Senior apartments, congregate living, and care facilities:

Consider developing a summary sheet for each facility. Include notes on

contacts, levels of care, costs, range of housing options, availability of short-

term stays, age restrictions, and other information.

Health facilities, hospitals, clinics, and rehabilitation facilities:

List facilities with phone numbers and addresses.

Home health care:

Provide contacts for hiring home health care workers.

Specialists:

List area specialists in cardiology, ophthalmology, gerontology,

rheumatology, orthopedics, neurology, chiropractic, and other specialties.

Personal care:

List hair stylists and manicurists who provide in-home service.

Medicare drug plan participating pharmacies:

Contacts for local participating pharmacies.

Cultural and entertainment venues:

List theaters, cinemas, concert venues, art galleries, and museums.

Libraries and bookstores:

List reading clubs and discussion groups.

Houses of worship:

List churches, temples, mosques, and clergy contacts.

Educational opportunities:

List senior-friendly learning environments, community colleges, university

extensions, and lifelong-learner programs.

Aging-support organizations:

List local offices that provide support services for elderly.

Magazines and newsletters:

Provide sample copies of magazines and newsletters targeted to senior

readers.

I-Note: LEAD a discussion of types of resources to research and add to a resource bank. DISCUSS how a resource bank can be used as a market distinction.


210

Travel clubs:

List travel agents that specialize in senior travel—group travel is an excellent

way for seniors to get acquainted and make friends.

Banks, mortgage lenders, and mortgage counselors:

Provide information on financial and lending institutions, reverse mortgage

lenders, and counseling services.

Volunteer opportunities:

Provide information on volunteer involvement opportunities.

Employment (paid) opportunities:

Provide information on area employers who hire seniors.

Clubs and hobby groups:

List activities for seniors to enjoy on their own and with younger family

members.

Advocacy groups:

List environmental, political, and issue-oriented groups.

Support groups:

List support groups for the bereaved, caregivers, and others.

Community events:

Provide information on community special events, observances, and annual

events.

Restaurants:

List restaurants that offer senior hours, prices, and portions as well as easy

access and comfortable seating and atmosphere.

Supermarkets and pharmacies with delivery services:

Include retail outlets that offer senior discounts and services.

Auto care:

List car dealerships, repair garages, and tow service.

Trends:

Provide information organized by dates or headings, such as local and

national issues.


211

MAKING PRUDENT REFERRALS TO EXPERTS

By: Nan Roytberg


Reprinted with permission from Today’s Buyer’s Rep, Real Estate Buyer’s Agent Council.

You’re an expert on real estate. But you can’t be an expert on every aspect of

real estate. You can’t know whether there’s mold behind the walls, whether the

roof will last another ten years, whether the well water is potable. And trying to

finesse these questions will quickly get you in big trouble, legal trouble. So just

as discretion is the better part of valor, so too is knowing when to say, “I don’t

know, but I can give you the names of some experts” is an important part of

avoiding legal liability. You also can’t do everything your buyer wants and needs.

And as much as you may want to go the extra mile to complete the sale, you

can’t promise to paint the house, renovate the kitchen, repair the furnace and

provide financing. You can, however, help your buyer find the right people to

take on those jobs.

Buyers often expect that you’ll know who to contact to get certain services, and

it’s always nice to anticipate their needs by having a written referral list of

experts they may need, such as:

Lenders

Home inspectors, both general and those who specialize in lead-based

paint, radon, termites, mold

Structural engineers

Painters, plumbers, electricians and carpenters

Attorneys

Insurance providers

Cleaning services

However, you need to make sure that the people and companies on your list are

reputable, so that your referrals don’t come back to haunt you through buyer

dissatisfaction or, even worse, a lawsuit.

One way a licensee can land in court is to recommend only one expert in a

specific field who does an inadequate job. In 2000, a brokerage that

represented buyers in Kentucky was sued when the pest control company it had

recommended failed to perform satisfactorily. The buyers engaged a particular

pest control company, on the recommendation of the broker, to inspect and

treat the property for termites prior to the sale. After the closing, the buyers


212

discovered that their home was still infested with termites. They sued everyone

involved in the transaction, including the brokerage that represented them and,

of course, the pest control company. Fortunately, the broker had protected

itself by recommending two other pest control companies to the buyers. The

Kentucky appellate court thus affirmed the decision of the trial court that the

brokerage’s recommendation did not constitute a guarantee of performance.

The court held that the buyer brokerage was not liable for the pest control

company’s failure to provide satisfactory services.

So when making any recommendation, your standard procedure should be to

include contact information for at least three suggested experts for each

category on your referral list, being careful not to recommend any one expert

over the others. Still, you need to go further. Putting three names on a list is not

enough to keep you out of trouble. Take the time to find the right names to put

on your list. In other words, include only those experts with whom you have had

good experiences yourself or who come highly recommended by others you

trust.

You should also cover yourself a bit more by placing a clear, conspicuous

statement on your referral information that says you are providing the list

merely as a service to your buyers. Disclaim liability further by stating on the list

that neither you nor your firm is responsible for any referred expert’s

availability, reliability or performance. Also include a statement attesting to the

fact that you do not receive any referral fees or other compensation from the

experts on the list. Any lawful affiliations you or your firm may have with any of

the suggested individuals or companies need to be disclosed as well.

These are the basics that you should do, but there are some things—things that

your buyer-clients might want or expect you to do to help them get that house

ready—that you should not do. In a case the California Court of Appeals heard

just last year, a home inspector identified a number of repairs for a particular

property, including the replacement of a water heater. The broker, who was a

disclosed dual agent, went beyond just referring a handyman to do these

repairs. The broker actually selected and retained the handyman, paying him

out of the sellers’ escrow funds. The handyman replaced the water heater with

a natural gas heater instead of one compatible with propane, which was the fuel

that fired it. There was a subsequent fire and the buyer’s boyfriend suffered

lung damage from smoke inhalation. The broker hoped that the “buyer’s

inspection advisory” and an addendum to the purchase agreement would shield

him from liability. The advisory stated that the brokers didn’t guarantee the

performance of others. The addendum stated that representatives of the broker

might provide referrals to “firms dealing in related real estate services such as

title insurance, escrow, pest control, geological/physical property inspection,

home warranties, etc.,” but the use of these firms was at the sole discretion of

the buyer and/or seller. The addendum further stated that referrals by the

broker did not imply “any specific recommendation, or any warranty of any


213

firm’s expertise or professional licensing status.” In this case, however, the court

looked beyond the language of the advisory and addendum. The broker had

gone beyond making a mere referral to the buyer. The broker had voluntarily

undertaken the responsibility to oversee the repairs and had been negligent in

such oversight by failing to ensure that the handyman understood that a

propane water heater was necessary. The appellate court thus reversed

summary judgment for the brokers, saying that there was a genuine issue of

material fact as to whether their involvement established a duty of care beyond

the exculpatory clauses (clauses intended to shield the broker from legal

liability—to make him not culpable—for any negligence on the part of the

experts whom the broker referred) in the buyer’s inspection advisory and

addendum to the purchase contract.

This is perhaps another case of actions speaking louder than words, but it is

most certainly a warning: Unless you’ve been engaged to manage the property,

stick to just giving the buyer some good, reliable names. Do more and you may

need a referral yourself…a referral for an attorney!


214

Resources

215

Resources


216

Resources

217

WEBSITES Senior Real Estate Specialist (SRES®)

http://seniorsrealestate.com

Senior Real Estate Specialist, Resources for 50+ Real Estate

www.sres.org


www.nar.realtor

NAR Research and Statistics

www.nar.realtor/ research-and-statistics

AARP

www.aarp.org

American Community Survey, U.S. Census Bureau

www.census.gov/programs-surveys/acs

American Occupational Therapy Association

www.aota.org



Center for Universal Design, College of Design, North Carolina State University

https://design.ncsu.edu

Certified Relocation and Transition Specialist

www.crtscertification.com



www.carf.org

Eldercare Locator

www.eldercare.gov

Federal Interagency Forum on Aging

www.agingstats.gov


www.agingstats.gov

HelpGuide.org

www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm

http://seniorsrealestate.com/


http://www.nar.realtor/

www.nar.realtor/%20research-and-statistics

http://www.aarp.org/

http://www.census.gov/programs-surveys/acs

http://www.aota.org/


https://design.ncsu.edu/

http://www.crtscertification.com/


http://www.eldercare.gov/

http://www.agingstats.gov/


http://www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm


218

HUD Certified HECM Counselors


HUD Home Equity Conversion Mortgage Webpage

www.hud.gov/program_offices/housing/sfh/hecm/hecmabou

Institute for Mobility, Activity, and Participation

http://driving.phhp.ufl.edu

Justice in Aging

www.nsclc.org

Leading Age

www.leadingage.org

LGBT housing protections by local community or state

www.lgbtmap.org/equality-maps/non_discrimination_laws

Medicaid Planner

www.medicaidplanningassistance.org/find-a-medicaid-planner

National Aging in Place Council

www.ageinplace.org

National Association of Senior Move Managers

www.nasmm.org

National Center on Elder Abuse

www.ncea.aoa.gov

National Council on Aging (NCOA)

www.ncoa.org

National Resource Center on Supportive Housing and Home Modification

www.homemods.org

NAR Data Security and Privacy Toolkit

www.nar.realtor/data-privacy-security/nars-data-security-and-privacy-toolkit

National Adult Day Services Association

www.nadsa.org

Program of All-Inclusive Care for the Elderly (PACE)

www.npaonline.org

SAGE National Resource Center on LGBT Aging

www.lgbtagingcenter.org


http://www.hud.gov/program_offices/housing/sfh/hecm/hecmabou




http://www.lgbtmap.org/equality-maps/non_discrimination_laws


http://www.ageinplace.org/

http://www.nasmm.org/

http://www.ncea.aoa.gov/

http://www.ncoa.org/

http://www.homemods.org/

http://www.nar.realtor/data-privacy-security/nars-data-security-and-privacy-toolkit

http://www.nadsa.org/

http://www.npaonline.org/

http://www.lgbtagingcenter.org/

Resources

219

U.S. Department of Health and Human Services: Administration on Aging

www.aoa.gov


www.gao.gov

Volunteer Match

www.volunteermatch.org

Weill Medical College of Cornell University, Department of Environmental

Geriatrics

www.environmentalgeriatrics.org

MAGAZINES AND EZINES On Common Ground

www.nar.realtor/on-common-ground

AARP Magazine


Grand Times Magazine

www.grandtimes.com

Reminisce Magazine

www.reminisce.com

Trailer Life

www.trailerlife.com

Senior Citizen Journal


The Senior Citizens Magazine

The Senior Citizens Magazine.com

Seniors Lifestyle Magazine

http://seniorslifestylemag.com

Today’s Caregiver

https://caregiver.com

http://www.aoa.gov/

http://www.gao.gov/

http://www.volunteermatch.org/


http://www.nar.realtor/on-common-ground





http://www.seniorcitizenjournal.com/

theseniorcitizensmagazine.com

http://seniorslifestylemag.com/

https://caregiver.com/


220

BOOKS Age in Place: A Guide to Modifying, Organizing and Decluttering Mom and

Dad's Home

Lynda Shrager

AgeProof: Living Longer Without Running Out of Money or Breaking a Hip

Jean Chatzky

Disrupt Aging: A Bold New Path to Living Your Best Life at Every Age

Jo Ann Jenkins

From Age-Ing to Sage-Ing: A Revolutionary Approach to Growing Older

Zalman Schachter-Shalomi

Get the Most Out of Retirement: Checklist for Happiness, Health, Purpose, and

Financial Security

Sally Balch Hurme

The Gift of Years: Growing Older Gracefully

Joan Chittister

The Happiness Curve: Why Life Gets Better After 50

Jonathan Rauch

Happiness Is a Choice You Make: Lessons from a Year Among the Oldest Old

John Leland

How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won't Get

from Your Financial Advisor

Ernie J. Zelinski

Ikigai: The Japanese Secret to a Long and Happy Life

Hector Garcia

Natural Causes: An Epidemic of Wellness, the Certainty of Dying, and Killing

Ourselves to Live Longer

Barbara Ehrenreich

Neither Married Nor Single: When Your Partner has Alzheimer's or Other

Dementia

David Kirkpatrick

On the Brink of Everything: Grace, Gravity, and Getting Old

Parker J. Palmer

Resources

221

Who Will Take Care of Me When I'm Old?: Plan Now to Safeguard Your Health

and Happiness in Old Age

Joy Loverde

Younger Next Year: Live Strong, Fit, and Sexy—Until You're 80 and Beyond

Chris Crowley

CONVERTING A SECOND HOME TO A PRIMARY RESIDENCE

According to NAR research, about one in four vacation-home owners intend to

use the property as a primary residence after retirement. What does this mean

for the SRES who is also a resort practitioner? The practitioner must be able to

help the buyer evaluate properties for both current and future use. For

example, during the years when a buyer is working or raising a family, a vacation

property may be used only for a couple of weeks during the year and rented the

rest of the time. As buyers reach retirement age, they may plan to spend more

time in the home or convert it to a year-round retirement residence.

A strategy for converting a rental home to a retirement residence is to purchase a second home and rent it aggressively using the rental income to offset as much of the mortgage and expense as possible. When the owner is ready to retire, the primary home may be sold and the proceeds used to refurbish the rental home, which then becomes the owner’s retirement residence. Or, the owner may sell both the primary and second home and use the proceeds to purchase a new home.

Buyers looking for a property in anticipation of retirement should carefully

consider how the home will fit their future lifestyle, income level, and savings.

For example, will the property still be affordable on a retirement income? Even

if the buyers are familiar with the area, all of their time there may have been

during the same season. Before they make a year-round commitment, especially

if they are purchasing a home in anticipation of retirement, a specialist should

encourage buyers to visit the area during both peak season and off season. This

provides firsthand experience of off-season living. Factors to consider include:

Will the weather be too cold or hot?

Will off-season road conditions hinder access?

Will peak-season traffic congestion be tolerable?

Will services and shopping facilities be available year-round?

Will there always be something interesting to do?

Will peak-season visitors be too noisy or disruptive?


222

i

Student Manual Version 2.3

ii

iii

Copyright © 2015, 2018, SRES® Council

Version 2.3

Published by the National Association of REALTORS®. All rights reserved. The National Association of

REALTORS® owns these materials or have been granted permission from the copyright owners to

distribute and reproduce them. Authorization is limited to view, store or print these materials for

personal and non-commercial use only. No part of these materials may be reproduced, in any form or by

any means, without permission in writing from the National Association of REALTORS®.

IMPORTANT NOTE: The SRES® Council and National Association of REALTORS®, its faculty, agents, and

employees are not engaged in rendering legal, accounting, financial, tax, or other professional services

through these course materials. If legal advice or other expert assistance is required, the student should

seek competent professional advice.


SRES® Council

430 North Michigan Avenue

Chicago, IL 60611-4087

USA

800-500-4564

[email protected]

www.seniorsrealestate.com

mailto:[email protected]


iv

ACKNOWLEDGMENTS

The SRES® Council would like to express appreciation to the following for their participation and

contributions to the course revision process:

Larry Anderson

ABR, GRI, CRS, e-Pro, SFR, GREEN, BPOR, SRES®, REEA, TRC

Fairfax, Virginia

Jeff Berger

NAGLREP Founder and CEO

Skip Frenzel

SRES®, GRI, CRS, GHS™, CSA®, CFP®, CLTC, CMFC

Campbell, California

Kelly Kent

M.U.P

Director of National LGBT Elder Housing Initiative, SAGE

Patti Ketcham

CRS, GRI, CLG, AHWD™, e-PRO, MRP, FMS, SRES®

Tallahassee, Florida

Dr. Nii-Quartelai Quartey

AARP Senior Advisor and National LGBT Liaison

v

TABLE OF CONTENTS

Introduction ......................................................................................................................................1

Course Learning Goal ................................................................................................................................ 3

What You Will Learn ................................................................................................................................. 3

Activities and Class Procedures ................................................................................................................. 6

SRES® Council ............................................................................................................................................. 6

Earning the SRES® Designation .................................................................................................................. 6

SRES® Member Benefits ............................................................................................................................ 7

Knowledge Base for the Course ................................................................................................................ 9

Module 1: Generations .................................................................................................................... 11

Generations ............................................................................................................................................. 13

Six Living Generations ............................................................................................................................. 15

Test Your Generation IQ ......................................................................................................................... 16

Module 2: The 50+ Market ............................................................................................................... 19

Myths and Realities of Aging ................................................................................................................... 21

Understanding How We Age ................................................................................................................... 27

The Client Across the Desk ...................................................................................................................... 30

Working with Gen X and Gen Y ............................................................................................................... 31

Exercise: Generations ............................................................................................................................. 33

Exercise: Interview Your Elders ............................................................................................................... 34

Module 3: 21st Century Retirement ................................................................................................... 35

Changing Concept of Retirement ............................................................................................................ 37

Impact of Economic Events ..................................................................................................................... 39

Households and Homeownership ........................................................................................................... 40

Increasing LGBT Cultural Competence .................................................................................................... 44

Housing Choices ...................................................................................................................................... 46

Home—Asset or Anchor? ........................................................................................................................ 49

Module 4: Aging in Place .................................................................................................................. 51

Plan for Aging in Place ............................................................................................................................. 53

Planning Continuum for Aging in Place ................................................................................................... 54

Aging in Place: The Community .............................................................................................................. 55

vi

Retiring to Your Home ............................................................................................................................ 56

Aging in Place—The Home ...................................................................................................................... 61

Universal Design Standards..................................................................................................................... 62

Adapting a Home for Aging in Place........................................................................................................ 64

Make a SAFE Plan for Aging in Place ....................................................................................................... 67

Opportunities for Real Estate Professionals ........................................................................................... 68

Module 5: Independent Living .......................................................................................................... 69

The Housing Cycle ................................................................................................................................... 71

Active Adult Communities ...................................................................................................................... 72

Seniors Apartments ................................................................................................................................. 74

Cohousing ................................................................................................................................................ 75

Age-Restricted Communities .................................................................................................................. 76

Housing for Older Persons Act ................................................................................................................ 77

Module 6: Housing Options for Assistance ........................................................................................ 79

When Is It Time to Make a Transition? ................................................................................................... 81

Downsizing .............................................................................................................................................. 82

Congregate Living .................................................................................................................................... 86

Assisted Living ......................................................................................................................................... 87

Continuing Care Retirement Communities ............................................................................................. 88

Skilled Nursing Facilities .......................................................................................................................... 90

More Care Options .................................................................................................................................. 91

What Will Medicare or Medicaid Pay For? ............................................................................................. 94

Module 7: Financing Options ............................................................................................................ 97

What Can a Reverse Mortgage Accomplish? ........................................................................................ 100

How Do Reverse Mortgage Work? ....................................................................................................... 101

Types of HECMs .................................................................................................................................... 102

HECM Eligibility ..................................................................................................................................... 103

Counseling—The Important First Step .................................................................................................. 104

HECM Application Process .................................................................................................................... 107

Principal Limits and Costs ..................................................................................................................... 108

HECM Fact Sheet ................................................................................................................................... 110

Reverse Mortgage Alternatives ............................................................................................................ 112

vii

Reverse Mortgage Benefits ................................................................................................................... 112

When Is a Reverse Mortgage Not a Good Idea? .................................................................................. 113

Who Owns the Property?...................................................................................................................... 114

What Happens to the Non-Borrowing Spouse if the Borrower Dies? .................................................. 114

What Do Heirs Receive? ........................................................................................................................ 114

More FAQs about Reverse Mortgages .................................................................................................. 115

Scenarios ............................................................................................................................................... 117

Family Issues ......................................................................................................................................... 122

Opportunities for the Real Estate Professional .................................................................................... 122

Selling or Buying a Reverse Mortgaged Home ...................................................................................... 123

Module 8: Tax Matters ................................................................................................................... 125

Declaring a Principal Residence ............................................................................................................ 127

Understanding Capital Gains Tax .......................................................................................................... 128

Capital Gains Tax on Sale of Principal Residences ................................................................................ 129

Capital Gains Tax on Sale of Converted Second Homes ....................................................................... 130

Estate Tax Issues ................................................................................................................................... 132

Gift and Generation-Skipping Tax ......................................................................................................... 133

Can an IRA Own Real Estate? ................................................................................................................ 134

Tax-Deferred 1031 Exchanges .............................................................................................................. 134

Basic Rules for Tax-Deferred 1031 Exchanges ...................................................................................... 136

Exchanging a Vacation Home ................................................................................................................ 138

Personal Residence Received in an Exchange ....................................................................................... 138

Case Study ............................................................................................................................................. 138

Qualified Intermediaries ....................................................................................................................... 141

Why Exchanges Fail ............................................................................................................................... 141

Community Property ............................................................................................................................. 142

Taxes on Social Security and Pension Income ...................................................................................... 143

Installment Sales ................................................................................................................................... 143

Module 9: Legal Matters ................................................................................................................ 145

Risk Management Issues ....................................................................................................................... 147

Confidentiality Issues ............................................................................................................................ 147

Selling Below Market ............................................................................................................................ 148

viii

Power of Attorney ................................................................................................................................. 149

Conservators, Guardians, and Executors .............................................................................................. 151

Competency Issues ............................................................................................................................... 153

When a Client Dies or Becomes Incapacitated ..................................................................................... 156

Probate .................................................................................................................................................. 156

Life Estates and Trusts .......................................................................................................................... 157

Elder Law Attorney ................................................................................................................................ 158

Module 10: Marketing and Outreach .............................................................................................. 161

The Half-Century Consumer .................................................................................................................. 163

Prospecting Strategies .......................................................................................................................... 165

Lawful Target Marketing ....................................................................................................................... 166

Six Marketing Strategies for the 50+ Market ........................................................................................ 168

Your Value Proposition ......................................................................................................................... 171

Exercise: Your Value Proposition—Why Choose Me? .......................................................................... 172

Exercise: Market Outreach ................................................................................................................... 173

Seminars and Presentations ................................................................................................................. 174

3-Minute Brainstorming Challenge ....................................................................................................... 178

Your Digital Presence ............................................................................................................................ 179

Module 11: Working with Buyers and Sellers .................................................................................. 183

Providing Assurance .............................................................................................................................. 185

The FORD Interview .............................................................................................................................. 187

Exercise: FORD Interview ...................................................................................................................... 188

The Big Questions ................................................................................................................................. 188

Exercise: The Real Meaning .................................................................................................................. 190

Understanding Needs and Capabilities ................................................................................................. 190

Viewing and Showing Properties .......................................................................................................... 191

Sensitivities ........................................................................................................................................... 192

Involving Family Members .................................................................................................................... 196

Recognizing Elder Abuse and Neglect ................................................................................................... 198

Schemes and Scams .............................................................................................................................. 199

Data Security Planning .......................................................................................................................... 200

Emotional Impact on the Real Estate Professional ............................................................................... 201

ix

Module 12: Building a Team and Resource Bank ............................................................................. 203

Building Your Team ............................................................................................................................... 205

More Services ........................................................................................................................................ 207

Organizing a Resource File .................................................................................................................... 208

Making Prudent Referrals to Experts .................................................................................................... 211

Resources ...................................................................................................................................... 215

Websites ................................................................................................................................................ 217

Magazines and Ezines ........................................................................................................................... 219

Books ..................................................................................................................................................... 220

Converting a Second Home to a Primary Residence ............................................................................. 221

x

Introduction

1

Introduction


2

Introduction

3

COURSE LEARNING GOAL The Seniors Real Estate Specialist (SRES®) Designation Course helps real estate

professionals develop the business-building skills and resources for

specialization in the 50+ real estate market by expanding knowledge of how life

stages impact real estate choices, connecting to a network of resources, and

fostering empathy with clients and customers.

WHAT YOU WILL LEARN



Distinguish generational characteristics of demographic groupings of the

50+ market.



Challenge stereotypes about older adults’ activities and interests.

Apply do’s and don’ts when working when striving to gain and serve the 50+

market

Adapt your communications and interpersonal approach to match

generational expectations and preferences.



Identify issues and factors that influence older adult’s decisions to sell or

buy and home choose a community.

Apply knowledge of how household composition impacts retirement plans

and housing choices to better serve clients and customers.


4


Acquaint clients and customers with desirable community and home

features for aging in place.

Help clients and customers evaluate the adaptability, safety, and suitability

of a home for aging in place.

Evaluate the livability of market area’s communities and neighborhoods for

aging in place.


Apply knowledge of age-based homeownership cycle in order to help clients

and customers find homes that fit their preferences, life stage, and needs.

Research senior-oriented communities, developments, and housing options

in your market area and opportunities for real estate professionals.

Alert clients and customers interested in age-restricted communities of

eligibility requirements, regulations, and restrictions.


Distinguish between types of elder housing options that offer assistive

services.

Provide clients and customers and their families with helpful insights based

on your experience of how others have made the transition to housing with

assistive services.



Identify situations in which a home equity conversion (HECM) mortgage

would be helpful and appropriate.

Alert clients and customers and their families to the benefits, uses, pros and

cons of HECMs and alternatives.

Identify issues involved in listing or representing a buyer interested in a

home with a HECM.

Introduction

5



Recognize situations in which a tax-deferred 1031 exchange would be

possible and advantageous.

Alert clients and customers to tax issues that could impact spouses,

partners, and heirs.


Avoid inappropriate involvement in family matters and maintain focus on

the real estate transaction.

Manage potential legal liabilities and avoid conflicts of interest in real estate

transactions.

Maintain confidentiality of information when providing services for 50+

clients and customers and their families.


Develop business building outreach methods for gaining and communicating

with the 50+ market.




Develop services that win and sustain client and customer relationships and

position you as a trusted real estate advisor.

Counsel sellers on preparing and staging a property for sale.

Warn clients and customers of financial schemes and scams that target the

elderly.



Compile a knowledge bank about your market area’s housing options,

programs, resources, and services for 50+ clients.



6

ACTIVITIES AND CLASS PROCEDURES This course incorporates a variety of activities designed to involve students,

such as work group assignments, exercises, and discussions. Students are

strongly encouraged to ask questions and engage in class discussions and group

exercises. The range of experience levels among students offers a rich

opportunity for learning from peers. Your active involvement will enrich the

learning experience for yourself and others.

SRES® COUNCIL The SRES® Council, part of the NAR family, supports real estate professionals

who specialize in serving real estate buyers and sellers age 50 and older. The

SRES® Council connects you to a network of 16,000 referral partners. It positions

you as an expert contact for incoming referrals as 50+ buyers look for the

perfect retirement property and community; and a source of outgoing referrals

when past clients move to other locations. For the many who plan to stay close

to home as they downsize, upsize, and transition, NAR research shows that a

client’s friends and relatives are the leading sources of referrals.

EARNING THE SRES® DESIGNATION The SRES® designation is awarded to REALTORS® who successfully complete the

required education course. It is the only designation of its kind recognized by

NAR. The following three requirements must be met to attain the use of the

SRES® designation.

1. Complete the SRES® Designation Course.

2. Maintain active membership in the SRES® Council. The SRES® Designation Course fee includes 1 year’s membership in the SRES® Council (annual dues are $99 thereafter).

3. Maintain active membership in NAR or an international cooperating association.

Earn Credit for Other REALTOR® Designations

Completing the SRES® Designation Course also meets elective course

requirements for earning the Accredited Buyer’s Representative (ABR®) and

Certified Residential Specialist (CRS) designations.

Introduction

7

SRES® MEMBER BENEFITS

National recognition as an official NAR designation

The SRES® Professional, a quarterly eNewsletter with information about

senior-related issues, such as legislative initiatives, financial and legal

matters, and housing trends

Customizable SRES® consumer newsletters

Library of customizable marketing letters and scripts

Customizable, downloadable marketing materials: logos, brochures, ad

slicks, postcards, press releases, news articles, and more

Listing in a searchable online directory of SRES® designees, which can be

viewed by potential clients and referrals

Certificate and lapel pin

Consumer website (www.sres.org)

Moving On brochure and toolkit for your clients

Access to an online network of resources to support your business

Visit the Seniors Real Estate

Specialist® website at

www.seniorsrealestate.com.



8

SRES®—A Market Distinction

When you distinguish yourself as a specialist in the 50+ market, you can

reference our network of professional resources that serve the needs of your

clients. Many of our partner organizations are industry leaders and provide

great references for education and tools to assist the needs of senior clients.

These organizations also provide users with the ability to find an SRES® on their

websites and provide discounted services to SRES® members. Please note, these

partnerships can be subject to change.

Introduction

9

KNOWLEDGE BASE FOR THE COURSE

Presentation of the course assumes that students have a foundation of

knowledge of certain real estate principles and laws.

REALTOR® Code of Ethics

From time to time, course content refers to articles and standards of

practice of the REALTOR® Code of Ethics. It is assumed that students know

how to apply these principles in day-to-day business conduct. During the

course, we will examine some of the distinct challenges involved in working

with clients and customers in the 50+ market, particularly some very elderly,

such as maintaining client confidentiality when other family members are

involved.

Fair Housing Laws

All the federally protected classes apply when working with the 50+ market.

Although federal statutes do not specify age as a protected class, some

states and municipalities do. And, as we will learn later in the course,

federal law provides an exemption from familial status that enables age-

restricted housing for residents age 55 and older.

Agency Representation

As the course is presented, issues involving client representation—sellers

and buyers—will be discussed. As with application of the Code of Ethics, real

estate professionals who work with 50+ market clients and customers may

encounter circumstances that appear to blur the lines of client

responsibility. The course will examine how to remain true to agency

representation principles, as defined by your state’s real estate laws, in

sensitive situations.


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11



12


13

Do you know where your market is going? Visualize your market 10 years into

the future. Consider that in 2030:

More than one-third (37%) of the U.S. population will be age 50 or older.

All baby boomers will be age 65 or older.

The leading edge of Generation X will reach age 65.

As we will see throughout the course, demographic forces alone will shape your

future market as generations experience the life transitions—their own and

their parents'—that accompany aging.

The course focuses on the maturing generations that make up the 50+ market,

now and for the next decade. But, interaction with younger generations must be

considered because they are the young adults who may be involved in the real

estate decisions of their parents and elders. Of course, the baby boomers will be

a particular emphasis because for the next couple of decades they will make up

the most active 50+ market.

For ease of reference throughout the remainder of the course, the maturing

generations may be collectively referred to as “matures” or “elders” and the

specialty as the “50+ market.”

GENERATIONS The first challenge in studying the groups and individuals who make up the 50+

market is developing a set of workable definitions and satisfactory terminology.

Demographic statistics paint the picture of the maturing generations of home

buyers and sellers in terms of numbers. With the leading edge of the baby

boomer generation reaching its 70s, there may be a natural inclination to think

of the future of the mature real estate market in terms of that generational

cohort and its distinctive characteristics. However, to gain an in-depth

understanding of the senior market that can translate into business success for

the real estate professional, all the living generations should be defined not only

in terms of numbers and birth dates, but also in terms of attitudes, motivations,

lifestyle and work style, activity levels, health, future plans, retirement

readiness, and other characteristics.

Why is it helpful to look at generational commonalities and differences?

Although not a substitute for learning about clients’ and customers’ individual

preferences and lifestyles, generalizations can provide insight into what is

important to them, as well as how to best communicate and market to them,

with regard to their motivations, lifestyles, hopes, and fears.

Shared experiences of key events shape our outlooks and behaviors.

Demographers generally agree that events experienced in childhood, youth, and


14

young adulthood—the formative years—influence age-peers and shape

attitudes and viewpoints, interpersonal behavior, career and family priorities,

tastes, and other aspects of human behavior, both subtle and overt.

Generalizations can provide a frame of reference from which to start

understanding clients’ needs and preferences. For example, as we will see in the

material that follows, recommending an age-restricted community with lots of

planned activities may be a big turnoff for a baby boomer who views himself as

a rugged individualist, but it would be just the right choice for a member of the

older silent generation. Consider, too, that your client may be a member of the

generally cautious Silent Generation, but when it comes to making decisions

about real estate and housing options, the client’s skeptical Gen X children may

be very involved in making decisions about where and how their parents will

live.

A fast-growing segment of the population is nonagenarians, people in their 90s,

and centenarians, people age 100 or more. Census projections put the number

of nonagenarians at 3.3 million in 2030.1 Although a relatively small percentage

of the overall population, the increasing numbers of the very elderly will

challenge societal institutions’ adaptability, particularly in the areas of medical

care, long-term care, and housing. Nonagenarians and centenarians generally

keep a positive outlook and have an innate ability to “let go” of life’s sad events.

Let’s look at the characteristics of generations based on the U.S. Census Bureau

population data.

1 Projected 5-Year Age Groups and Sex Composition: Main Projections Series for the United States, 2017-2060, U.S. Census Bureau, Population Division: Washington, DC., Release Date: March 2018. www.census.gov/data/tables/2017/demo/popproj/2017-summary-tables.


15

SIX LIVING GENERATIONS The G.I. Generation, born 1901–1924, is quickly passing from the scene. The youngest

members of this generation are age 94 in 2018. About 890,000 in number, they

represent less than one percent of the U.S. population.

Silent Generation

1925–1945

7.66% of population

24.9 million

Age in 2018: 73–93

Cautious, conformist, risk-

averse, unimaginative,

industrious, prudent,

unquestioning of

authority

Baby Boomers

1946–1964

21.9% of population

71.3 million

Age in 2018: 54–72

Ambitious, optimistic,

individualistic, seeking

immediate gratification,

hardworking,

competitive, materialistic,

forever young

Generation X

1965–1976

15.2% of population

49.5 million

Age in 2018: 42–53

Skeptical, latchkey kids,

isolated, entrepreneurial,

independent, quality of

life/family before career,

self-reliant, pragmatic,

cynical, reluctant to

commit

Millennials/

Generation Y

1977–1994

24.2% of population

78.8 million

Age in 2018: 24–41

Empathetic with elders.

sheltered, tolerant,

sensitive to

multiculturalism, hopeful,

over-scheduled,

multitaskers, short

attention span

Generation Z

1995–2010

20.7% of population

67.6 million

Age in 2018: 8–23

Technology adept,

connected, introverted,

short attention span,

individualistic, impatient,

communication in social

media

Generation Alpha

Born 2011-

9.8% of population

32 million

Age in 2018: 7 and under

First generation born

entirely in the 21st

century. likely to be self-

reliant, independent,

trust as a core value, only

children of older parents


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TEST YOUR GENERATION IQ

Because brand names become an integral part of everyday life, they also

become iconic of their eras. Can you match these brand names with the type of

product?

1. Woolworth ( ) A. Toothpaste

2. Braniff ( ) B. Wine

3. Drexel Lambert ( ) C. Magazine

4. Metrecal ( ) D. Fad gag gift

5. Ipana ( ) E. Car company

6. Green Acres ( ) F. Laundry detergent

7. Life ( ) G. Lipstick

8. Pet Rock ( ) H. Rock group

9. Annie Greensprings ( ) I. Band leader

10. Burma Shave ( ) J. TV sitcom

11. Tangee ( ) K. News service

12. Twiggy ( ) L. Variety store

13. Wang ( ) M. Gadget inventor

14. Jordache ( ) N. Department store

15. Hai Karate ( ) O. Savings reward program

16. DeLorean ( ) P. Airline

17. Bonwit Teller ( ) Q. Jeans

18. Wisk ( ) R. Restaurant chain

19. Popeil ( ) S. Junk bond broker

20. Jefferson Airplane ( ) T. Fashion designer

21. Herb Alpert ( ) U. Word processer

22. Movietone ( ) V. Shaving cream

23. KonTiki Ports ( ) W. Fashion model

24. Green Stamps ( ) X. Men’s cologne

25. Halston ( ) Y. Weight loss beverage


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Looking Ahead

Those age 50+ represent a huge market potential because they possess most of

the nation’s personal wealth and home equity. Experienced practitioners attest

that 50+ clients will buy and sell two or three times as they transition through

life stages. As you gain a reputation as a trusted real estate advisor and

demonstrate your expertise and empathy in serving the 50+ market, you will tap

into a stream of future business. Let’s take a closer look at the characteristics of

the market and how best to serve different generational groups, as well as some



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20


21

As we learned in the previous chapter, the generations of the 50+ market

represent a huge business opportunity. If the core skills you use every day—

prospecting, listing, counseling, providing services, showing property,

marketing, and other skills—apply with this market, what is different? Do you

have to be over 50 to work with this market? Regardless of your generational

“label,” conscientious and empathetic service will win you a reputation as a

trusted real estate advisor. Although generalizations cannot substitute for

understanding individual clients or customers, they can help you be aware of

the concerns, circumstances, and conditions of their lives and choices. Ask

yourself: am I aware of how the physical changes of aging affect mature adults

and the elderly? Do I know how to adapt services? Let’s begin by exploring some


MYTHS AND REALITIES OF AGING

Myth: Old People Are All the Same.

REALITY

The diversity of interests and experiences of youth and middle age is no less

present in mature years. In fact, older people are more diverse in important

ways than younger individuals. Just about everyone knows someone who is a

“youthful” 80 or an “old” 50. Health is a major factor in aging, and genetics plays

a role in both how quickly we age and what ailments we develop. But other

factors are also determinants, such as education, socioeconomic group, climate,

societal expectations, activity level, nutrition, and social connections. Negative

attitudes about aging and stressful life events, such as the death of a loved one

or financial hardships, can accelerate the aging process. Although we cannot

control the environment into which we are born or our experiences of

childhood, our actions and decisions as adults shape the course of life. And each

individual’s accumulation of life experiences is distinctly unique.

Accumulated experiences and life choices make older people a more diverse group than younger people.


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Myth: Families “Dump” Relatives into Nursing Homes.

REALITY

Nursing homes are a last resort for most families. Less than 5 percent of the

elder population resides in nursing homes. For the most part, families provide

in-home care with little or no outside support until the time of a crisis, such as

caregiver stress, intervening family responsibilities, illness, or increased care

needs. Services that allow elders to stay in their own homes or with family are

the first choice. Reflective of a long tradition of caregiving across generations,

African Americans are more likely to reside in extended households than their

white age-peers.

Myth: Old Equals Ill and Disabled.

REALITY

Research by the Federal Interagency Forum on Aging finds consistently that

more than half of respondents at all age levels rated their health as good to

excellent. “Individuals' beliefs about their own health status also have been

found to influence their expectations of retirement and the retirement process

itself.”2

Even though medicine has made significant advances during the lifetime of the

health-conscious baby boomers, they are aging into their senior years with

higher rates of disability and chronic disease—hypertension, high cholesterol,

obesity. On the plus side, boomers are less likely to smoke and experience lower

rates of emphysema and heart attack.3

Although overall disability rates among the 65+ population have declined in the

past 20 years, the baby boomers are entering senior and retirement years in

worse shape than previous generations. On the other hand, boomers—the

“forever young” generation—have higher expectations than earlier generations;

for their grandparents and parents, aches and pains were a natural part of

aging.

More than half of respondents at all age levels rated their health as good to excellent.

2“Growing Older in America” The Health and Retirement Study, National Institute on Aging, U.S. Department of Health and Human Services, www.nia.nih.gov. 3 King, Dana, MD et al., “The Status of Baby Boomers’ Health in the United States: The Healthiest Generation?” Journal of American Medical Association Internal Medicine, Vol 173 (No. 5), www.jamainternalmed.com.


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FIGURE 2.1: SELF-REPORTED HEALTH STATUS OF GOOD TO EXCELLENT

Age 65–74 Age 75–84 Age 85 and older

Source: “Older Americans Update: Key Indicators of Well Being,” Federal Interagency Forum on Aging, www.agingstats.gov.

Myth: Old People Are Lonely and Gradually Withdraw.

REALITY Although the number of casual relationships may decline, mature and elder

adults have close friends and relationships to the same degree that younger

people do. Relationships with family and friends are an important part of

satisfaction with life. Moreover, maintaining ties with friends, family, and the

community is a major motivator for the desire to age in place. Only a small

percentage of elders are actually alienated from family, usually due to long-

standing estrangement. Most 50+ adults are members of a family network, see

their children weekly, or have frequent telephone contact. But, for reasons of

privacy and autonomy, most elders express a preference not to live with their

children.

Transportation is an important factor in maintaining social involvement, as well

as accessing essential services and even needed medical treatment. The

physical, mental, and financial factors that make it difficult for elders to drive

also make it difficult to use public transportation. The involvement of volunteer

drivers can help with both general and specialized transportation services.

80% 75% 68%


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Driver Safety

Even though some older adults drive safely into their eighth and ninth

decades, a study by the National Institutes of Health found that on average,

drivers age 70–74 continue driving for 11 more years.4

The ability to continue driving is a top concern for maintaining independence.

According to AARP research, older adults who are non-drivers are six times

more likely to miss out on something they would like to do because of lack of

transportation. AARP offers low-cost online and classroom driver safety

training and tips on talking to older drivers about their driving. The course

tunes up driving skills and updates knowledge of the rules of the road. Drivers

who complete the course may qualify for a discount on auto insurance. For

information about the course, including how to host an AARP Driver Training

Course, go to www.aarp.org/home-garden/transportation/driver_safety.

Myth: Older People Are Richer, Poorer Than Young People.

REALITY Social Security has greatly reduced the number of older people living in poverty.

In the 1960s, 45 percent of seniors lived in poverty and only 60 percent received

Social Security benefits; by the 1990s, the overall elder poverty level was

reduced to 10 percent, with 93 percent receiving Social Security benefits.

Among African-American and Hispanic elders, however, higher poverty rates

persist—26 and 21 percent, respectively. A number of mature adults are cash-

poor and house-rich. For many seniors, their homes account for most of their

net wealth.

FIGURE 2.2: INCOME DISTRIBUTION

4 Foley, Daniel J. et al., “Driving Life Expectancy of Persons Aged 70 Years and Older in the United States,” American Journal of Public Health, August 2002, Vol 92, No. 8. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1447231.

High income 36.4%

Middle Income31.1%

Low Income 22.5%

http://www.aarp.org/home-garden/transportation/driver_safety


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FIGURE 2.3: SOURCES OF INCOME

Myth: Older People Are More Likely to Be Victims of a Crime.

REALITY According to the U.S. Department of Justice (DOJ), older people are less likely to

be victims of crime than young people and property crimes are by far the most

frequently experienced. However, personal safety and fear of crime are

important factors in choosing a location. The fact is that when older adults are

the targets of violent crimes, they are more likely to experience severe injury

and are also more likely to face offenders who are strangers.

Myth: Every Retiree Wants to Live in Florida.

REALITY

The geographic distribution of the older population follows the same pattern as

the general population. The most populous states—California, Florida, Texas,

New York, Pennsylvania, Ohio, Illinois, Michigan, and New Jersey—are also

home to the largest percentages of older people. Florida remains at the top of

the list of states with the largest population of age 65+ residents. Other warm-

weather states such as California, Texas, North Carolina, South Carolina and

Nevada have fast growing older populations.

Eight out of 10 Americans live in metropolitan areas, and so does the older

population. About one quarter live in the central city. Metro elders cite access

to cultural and educational events as important considerations. They also value

the transportation, health care, and shopping available in metro areas that

would be difficult to replace in small towns or rural settings. The tradeoff for

metro living, however, may be a higher cost of living.

Assets 6%

Pensions 16% Earnings 24%Social Security

49%


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Myth: Older People Don’t Use Technology.

REALITY

People age 50+ are online and Internet-connected. According to a study by Pew

Research, up to 75–80 percent of adults between age 65 and 74 are online.

Among adults age 80+, Internet usage drops below half.

For “snowbirds” and those who are constantly on the go, email or social media

may be the most reliable way to keep in touch

Use the Internet5

Age 65–69 82%

Age 70–74 75%

Age 75–79 66%

Age 80+ 44%

“There are few other spaces—online or offline—where tweens, teens, sandwich generation members,

grandparents, friends, and neighbors regularly interact and communicate

across the same network.”6

According to a study by AARP, about 7 out of 10 of people between the age of

50 and 69 own a smart phone. Those over age 70, however, are more likely to

own a desktop computer than smartphone. Those who own a smartphone,

tablet, and desk/laptop tend to use the devices for different purposes;

“computers for practical tasks, tablets for entertainment, and smartphones for

social and on-the-go activities.”7

FIGURE 2.4: HOW ADULTS AGE 50+

USE COMPUTERS, SMARTPHONES, AND TABLETS (TOP 5 USES)8

Desk or Laptop Smartphone Tablet

Surf the Internet

Make a purchase

Get news and info

Banking and financial

Text and email

Text and email

Directions, traffic info


Surf the Internet

Get news and info

Surf the Internet

Get news and info


Text and email

Play games

Older adults do the same things online as younger people. They surf the net,

keep in touch by email and texting, comparison shop, get news and information,

use social networking sites, and get driving directions. Going online once or

several times a day is part of their daily routine.

5 Technology Use and Attitudes Among Mid-Life and Older Americans, AARP Research, December 2017, https://www.aarp.org/research/topics/technology. 6Mary Madden, “Older Adults and Social Media,” Pew Research Center, www.pewinternet.org/2010/08/27/older-adults-and-social-media. 7 Ibid. 8 Ibid.


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Elder Care Robots

The convergence of artificial intelligence and robotic technologies are a

burgeoning area of research and development in elder care. Adoption hurdles

include high costs and safety and privacy issues as well as user-friendliness of

devices. As these hurdles are tackled, the generations for whom technology is

part of daily life will likely welcome these assistive technologies that can extend

years of independent living, lend care giver support, and provide social

interaction. Just type “elder care robotics” in your Internet browser for

numerous articles and news about product development

UNDERSTANDING HOW WE AGE

Knowing about the physical aspects of aging can help you better understand

and serve the 50+ market. The good news is that, in the absence of disease,

normal aging can be a rather benign process. Genetic and environmental as well

as lifestyle factors determine how we age.

There’s good news about aging. A long lifespan provides the benefit of greater

perspective on life, self-knowledge, and a new depth to our gratitude. We

become less concerned with what others think about us, except for physical

appearance. Many life decisions—marriage, child rearing, career, retirement—

are settled and are no longer worries. Some might say a pleasure of “settling

scores” comes from living well and “outliving those who were mean to us.”

Respect for one’s own experiences, feelings, and opinions contributes to

successful aging, as does respect for the body through daily exercise and a

healthy diet.


28


Hearing: Hearing impairment

usually starts with loss in the

higher register tones and works

its way down until it reaches the

tone range of speech.

Vision: As we age, being both

near-sighted and far-sighted is

increasingly common. Low

vision is more common than

complete blindness. Subtle

color differences become less

distinct. At night, glare from wet

streets and the headlights of

oncoming traffic can make

driving difficult.

Weight: Weight increases in

men until mid-50s and in women

until late 60s, then gradually

decreases for both genders.

Increased body fat and slow

metabolism cause medications

to stay in the body much longer.

Temperature: We become more

vulnerable to heat stroke,

hypothermia, and dehydration as

the ability to maintain normal

temperature and blood pressure

decreases.

Height: Posture, spinal

alignment and compression,

and falling arches all can cause

decreased height.

Health: By age 70, almost

everyone experiences one or

more of seven common chronic

health conditions: arthritis, high

blood pressure, heart disease,

diabetes, lung disease, stroke,

or cancer.

Cognitive Ability: The abilities to learn, adapt, adjust, and express creativity are quite durable throughout life but are

influenced by interests and motivations. The habit of lifelong learning maintains cognitive ability. Language and problem-solving

skills do not diminish, but intuitive emotional right-brain thought tends to take precedence over logical left-brain thought.

Although the ability to recall names and events may decline, long-term “crystallized” memory is quite durable. Mild cognitive

impairment (MCI), more prevalent than destructive dementias or Alzheimer’s disease, doesn’t interfere with activities of daily

living (ADLs) or social interaction. Depression can be mistaken for cognitive impairment.


29

Working with Matures Working with Boomers

Remember full-service gas stations; feel that

“service isn’t what it used to be.”

May appear indecisive, overly cautious.

Afraid of outliving their assets.

Decisions are driven by circumstance, not the

market.

May be concerned with image when downsizing.

Value personal referrals.

See technology as a handy tool for

communications, news, and personal business.

May have little to occupy their time and may fill it

with repeated phone calls to the real estate

professional.

Value convenience and customization.

Do not need emotional support or hand-holding.

Hate rules.

Generally not need-driven or in a hurry.

Value representation of interests, managing the

process, pricing properties right, and one-stop

shopping.

Expect a timely response, but not necessarily

instant turnaround.

Want and expect expert services and advice.

Do not want information they can find themselves.

Comfortable with technology—it’s a basic need.

The Real Estate Professional Should The Real Estate Professional Should

Help them feel empowered to make a good

decision.

Provide testimonials and résumé.

Strive for face-to-face communication, courtesy,

and formality; address them as Mr. and Mrs., do

not use first names.

Be on time for all appointments.

Shake hands (“my word is my bond”).

Ask a lot of questions to find out what they really

want and don’t patronize.

Offer options and explain all the details.

Schedule a specific time for follow-up; explain that

you will address their concerns during that

appointment.

Be aware of physical limitations.

Emphasize your network of experts.

Be able to back up knowledge with experience and

credentials.

Provide the highlights.

Marketing should be age-targeted, not age-

restricted (boomers hate rules).

Inspire loyalty by demonstrating what you are

doing for them.

Interact in person, by telephone, or email.

Appeal to the active lifestyle.


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THE CLIENT ACROSS THE DESK

The core skills and processes that you use when working with any buyer or

seller are applicable when working with the 50+ market. So, what is different?

Life stage needs and wants

Viewpoints on real estate ownership change as adults move through the

years before and during retirement. Real estate professionals need to

understand how these life stages affect decisions to sell or buy real estate

as well as needs and wants. A counseling session might include discussion of

factors such as favorite leisure activities, preferences for community and

group activities, health, mobility, and continued career plans. But, it’s

important not to make assumptions. For example, not every retiree wants

to downsize; some may be planning ahead for visits from grandchildren,

room for hobbies, or a home-based business.

Health and activity stage

It may be more productive to profile prospects in terms of health and

activity stage than age and to consider how these influence needs and

wants.

Who has the aging issues?

Consider also who has the aging issues. Elder parents and adult children

may have conflicting concerns, expectations, and priorities. The real estate

professional must learn how to uncover root issues and sometimes help

clients balance priorities. For example, when parents move in with their

adult children, the aging issues are those of the elder parent, even though

both the parent and adult child qualify as 50+ market prospects.

A long time since the last transaction

Most 50+ adults are homeowners and have experienced selling and buying

real estate. However, it may have been a long time since the last real estate

transaction and many things may have changed in the interim. The

experience gap may make a client as apprehensive as a first-time buyer.

Lack of motivation or indecision may mask as worry over the process and

the ability to see it through successfully. On the other hand, some mature

adults work through a cycle of upsizing and downsizing, manage real estate

investments, or apply business experience to the transaction.

Emotional time

The sale of a home may be the result of a major life event, such as the loss

of a spouse or a disabling illness. Understanding the dynamics of this

situation is important to providing supportive client service. Because it may

be a very emotional time, the real estate transaction is imbued with

meanings and sensitivities that would not be factors for younger clients. For

example, posting a sign on the front lawn not only makes the sale of a long-


31

owned home a reality but may also signify letting go of cherished memories

and attachments.

Loss of the financial decision-maker

When one spouse passes away, it may mean the loss of the family financial

decision-maker. The surviving spouse may have an incomplete picture of the

family finances and little experience with evaluating and making financial

decisions.

Learn about Interests and Concerns

A good way to learn about 50+ market interests and issues is to subscribe to

senior magazines and read what they read.

AARP Magazine:


Grand Times Magazine:

www.grandtimes.com

Reminisce Magazine:

www.reminisce.com

Trailer Life:

www.trailerlife.com

Senior Citizen Journal:


WORKING WITH GEN X AND GEN Y

Why do we need to consider working with Gen X and Gen Y when the focus is

on the 50+ real estate market? These generations are the children of silents and

boomers and may be involved in the decisions about where and how their

parents will live. On page 32, we will look at some traits of Gen X and Gen Y.





http://www.seniorcitizenjournal.co/#m


32

Working with Gen X Working with Gen Y

Want you to provide access and

get the paperwork done.

Do not need “hand-holding” or

emotional support.

Pragmatic, risk-takers, results-

oriented.

Sense of entitlement.


Expect prompt response.

Skeptical.

Rely on themselves to find data.

Awareness level is very high.

Already know the good deals.


Pragmatic, but empathetic with

elders.

Tolerant of diversity.

Prefer directness over subtlety,

action over observation.

Crunched for time, always

multitasking.

Heavily influenced by media and

peers.

High-speed, instant access is

expected.

Technology is a way of life.

Influenced by the look of your

website, Facebook page, blog.



Help negotiate price and details.

Handle the paperwork.

Fill in information gaps.

Help interpret information.

Provide fast responses

(maximum 2 hours).

Deliver everything “yesterday.”

Realize there is only one chance

to get it right.

Do not try to “sell” them

anything.

Above all, keep cool.

Be accustomed to multitasking.

Communicate by texting, social

media.

Avoid pretensions.

Never overpromise.


33

EXERCISE: GENERATIONS It is important to take into consideration both the client and anyone who might

be involved in the real estate decision-making process, such as children and

relatives. Your team of experts (discussed later in this course) will probably

include individuals from across the generational spectrum, too.

What are the ages of the oldest and youngest persons in your family?

What are the ages of the oldest and youngest persons in your office?

Where do you fit in the range of ages and generations in your family and office?

How do the generational differences affect communications in your family

and office?


34

EXERCISE: INTERVIEW YOUR ELDERS On your own time, interview your parents or grandparents. Learn about their

ideas, outlook on life, retirement, and senior years. You may be surprised by

what you will learn.


35



36


37

This chapter looks at the trends, forces, and attitudes that define the retirement

landscape of the 21st century. The real estate professional who knows how

these forces and attitudes influence client behavior and choices can gain a

competitive edge. The retirement generations, including baby boomers, tend to

seek out and trust the advice of experts, and you want to be the trusted real

estate advisor.

CHANGING CONCEPT OF RETIREMENT When President Franklin Roosevelt signed the Social Security Act in 1935,

legislators intended to provide a secure retirement for the few years between

the end of working life and death. At the time, average life expectancies in

America were 58 years for men and 62 years for women; actuaries assumed

that disease would claim the lives of many before they were eligible for

benefits. Life expectancy for Americans is now 80 years. Preventive medicine,

along with nutrition and exercise, emphasizes adding healthy years in middle

and later life, not just extending years of infirm old age. Retirement is now the

“second half of life” and a time for reinvention and redefinition.

For an increasing number of Americans, retirement is more a journey spanning

several years and phases than a destination reached at age 65. Three trends are

reshaping retirement for 21st century Americans.

Delayed retirement

Phased retirement

Unretirement

The face of American retirement in 1935, the year of Social

Security enactment.


38

Delayed Retirement9



36%: Projected number of people age 65–69 who will be active workforce

participants in 2024

4.5%: Projected annual growth rate (2014–2024) for workforce participants age

65–54 (6.4% for workers age 75 and older)

13 Million: Projected number of active workforce participants age 65 and older

in 2024

Although older workers comprise the smallest percentage of the workforce they

are the fastest growing group according to the Bureau of Labor Statistics. A

combination of factors keeps workers on the job past the traditional age-65

retirement milestone.

Social Security Rules

Social Security rules encourage workers to stay on the job until they are old

enough to receive full benefits. Those born between 1943 and 1954 reach

eligibility for full Social Security benefits at age 66. Those born in 1960 or

later must stay on the job until age 67 for full benefits. Working past

eligibility age—up to age 70—earns credits that boost social security

benefits. Furthermore, AARP research shows that about four in ten older

workers need to work to make ends meet. 10

Education and Health

“Better education and health have increased older adults’ employment

prospects, jobs have become less physically demanding, and Social Security

and pension rule changes have made work more financially rewarding at

older ages.…Working longer boosts lifetime earnings, increasing Social

Security credits and the amount of resources workers can use to save for

retirement. It also shrinks the retirement period, so retirement savings do

not have to last as long.”11

9 Older workers: Labor force trends and career options, U.S. Bureau of Labor Statistics, Mitra Toossi and Elka Torpey | May 2017, BLS, https://www.bls.gov/careeroutlook/ 2017/article/older-workers.htm. 10 Williams, Alicia R. and S. Kathi Brown, “2017 Retirement Confidence Survey: A Secondary Analysis of the Findings from Respondents Age 50+”, AARP Research, December 2017. https://doi.org/10.26419/res.00174.001. 11 Johnson, Richard and Karen E. Smith, “How Retirement Is Changing in America”, Urban Institute, February 2016, https://www.urban.org/features/how-retirement-changing-america.


39

Staying Active

Money is not the only motivator for staying on the job after reaching

retirement age. Most older workers say they continue working to stay active

and involved and because they enjoy their jobs.

Phased Retirement

Instead of making an abrupt exit from the workplace some workers retire in

steps from full- to -part-time employment to eventual full retirement. During a

few years, they transition gradually through a series of bridge jobs from full-

time to part-time employment to full retirement.

Because few workplaces have a formal phased retirement process, employers

tend to work out ad hoc arrangements with valued employees. A phased-in

retirement arrangement can fill in the potential gaps when the employer can’t

find a new hire with the right skill mix. The employer keeps the worker’s

experience, skills, and knowledge on the job and the retiring employee stays

active and continues to earn income.

Unretirement

About three in ten workers unretire within six years of retiring.12 Retirees return

to the workplace for the same reasons that others delay or transition to

retirement.

IMPACT OF ECONOMIC EVENTS Each of the adult generations in their mature or middle-age years have

experienced economic shocks and setbacks occurred during peak earning years

or nearing retirement. For example, between June 2007 and November 2008,

Americans lost a quarter of their collective net worth as plunging house prices

wiped out home equity.

How did the Great Recession impact retirees? Research by Transamerica found

that most retirees experienced a decline in the value of their investments and

home. About one in ten (13%) retired earlier than planned due to job loss or

dissatisfaction, organizational restructuring, or buyouts and retirement

incentives. Despite the slow recovery, about half have full recovered, but one in

five (20%) feel they have not yet recovered fully and never will.13

12 The University of Michigan Health and Retirement Study (HRS), a longitudinal study supported by the National Institute on Aging (NIA U01AG009740) and the Social Security Administration, January 2017, https://hrs.isr.umich.edu/about/data-book. 13 18th Annual Transamerica Retirement Survey of Workers, Transamerica Center for Retirement Studies® (TCRS), TCRS 1364 -0618, Transamerica Institute, June 2018, https://www.transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2018_sr_18th_annual_worker_compendium.pdf.


40

Delaying or phasing in retirement or returning to the workplace may be the

result of efforts to recover financially, pay down debts, and restore the nest egg

lost during the Great Recession.

FIGURE 3.1: GENERATIONAL AGES DURING EVENTFUL ECONOMIC EVENTS

Generation age range Silents Baby

Boomers Gen X Gen Y Gen Z

1973:Oil embargo,

energy crisis 48–28 27–9 8– — —

1979: 2nd energy crisis,

S/L failures 54–34 33–15 14–3 2– —

1987: Black Monday

stock market crash 62–42 41–23 22–11 10– —

2000–2001:

Dot.com bubble, 9/11 75–55 54–36 35–25 23–6 5–

2007–2010: Great

Recession Subprime

mortgage crisis, housing

bubble, foreclosures

82–62 61–43 42–31 30–13 12–

HOUSEHOLDS AND HOMEOWNERSHIP 75.4%: Rate of homeownership age 55–65, 78.5% age 70+14

64.7%: Overall homeownership for Americans all ages15

Three out of five older adults age 55+ and close to eight in ten age 70 own their

own homes. In fact, the percentage of older adults who own their own homes

surpasses the overall rate of homeownership. The configuration of households

of older adults varies from solo agers to three or four generations living under

the same roof. Relationships, ages, and care needs impact housing choices as do

life changes. The loss of a spouse, an adult child boomeranging back to parent’s

home, an elder relative’s deteriorating health impact retirees’ plans to sell or

stay put, downsize, or upsize.

14 Release Number: CB18- 57, April 26, 2018 —U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey, April 26, 2018, Quarterly Residential Vacancies and Homeownership, First Quarter, https://www.census.gov/housing/hvs/files/currenthvspress.pdf 15 Ibid.


41

Married Couples

64% percentage of Americans age 55+ married, with spouse present16

Most older adults age 55–74 (64%) are married and live with their spouse. At

age 75, the percentage of married couples living together drops to about half

(52%) and by age 85 more than half (52%) of older adults are widowed.17 Loss of

a spouse is often the life event that brings about the sale of the family home

and purchase a smaller home, move to senior housing or move in with children

or other relatives.

Adult Children Living with Parents

24 million number of adult children (age 18-34) living in parents’ home, 8.3

million are age 25–34.18

“In 1975. 57 percent of young adults age 18–34 lived with a spouse and 26

percent lived with their parents. By 2016, the number of young adults living

with a spouse dropped by more than half (26 percent) and the percent living

with parents increased to 31 percent. A new pattern of “emerging adulthood” is

developing as young adults delay living independently, marrying, and starting

families.” 19

About one in four (6.3 million) adults children living with their parents are

neither employed nor enrolled in school. However, about 5 percent of the idle

group are disabled.

With their adult children still living in their home, parents may need to rethink

retirement plans, such as moving to a warmer climate, a senior oriented

community, or a smaller home with less maintenance responsibility. Paying off

student loan debt may impede saving for retirement and necessitate a return to

the workplace. On the other hand, adult children at home can provide are and

emotional support for aging parents and may contribute financially to the

upkeep and running of the home.

Student Loan Debt

Student loan debt is not an issue only for new graduates. Many retirees living on

fixed incomes are struggling to pay off student loan debt. The Government

Accountability Office estimates that 867,000 households are headed by

someone 65 or older who carries student loan debt. In addition, upwards of 6

16 Table A1. Marital Status of People 15 Years and Over, by Age, Sex, and Personal Earnings: 2017, Current Population Survey, 2017 Annual Social and Economic Supplement, Revised: May 4, 2018, U.S. Census, https://www.census.gov/data/tables/2017/demo/families/cps-2017.html. 17 Ibid. 18 Vespa, Jonathan, The Changing Economics and Demographics of Young Adulthood: 1975–2016, Current Population Reports, P20-579, Issued April 2017, https://www.census.gov/content/dam/Census/library/publications/2017/demo/p20-579.pdf. 19 Ibid.


42

million borrowers age 50 to 64 hold federal student debt. NAR’s 2018 Home

Buyer and Seller Generational Trends research study found a median student

loan debt load of $30,000 for a significant number of borrowers age 53–63—

crucial years for accumulating retirement savings.

FIGURE 3.2: % OF BUYERS WITH STUDENT LOAN DEBT

% Buyers who have student loan debt Amount (median)

Age 72–92 2% $15,000

Age 64–71 4% $25,000

Age 53–63 11% $30,000

Sandwich Generation

With children remaining financially dependent into adulthood and parents living

longer, healthier lives, a significant number of middle-aged and older adults are

caring for both elder parents and children. Baby boomers, however, are

gradually aging out of the sandwich generation as Gen Xers move into middle

age. Pew research reports that 42 percent of Gen Xers have parent age 65 or

older and a dependent child, compared with about a third of boomers.20

Although their elderly parents are healthier and wealthier than previous

generations, they are still likely to rely on their children for assistance and

emotional support. Dependent adult children tend to rely on their parents for

financial support. Sandwich generation households may carry a considerable

financial burden when the adults in the “middle” must support three

generations at one time: their parents, their immediate family (self and spouse)

and children.

Multigenerational Households

NAR’s survey of older home buyers found that one in five buyers age 53 to 62

purchased a multi-generational home—three of more generations living

together. Buyers 72 to 92 years was the second largest share at 17 percent.

Leading reasons for the home purchase were to take care of aging parents,

saving money, and because children over the age of 18 are moving back.21

The U.S. Census Bureau estimates the number of multigenerational households

at 4.6 million, about 4 percent of U.S. households, and the number of Americans

residing in such homes at 28.4 million.22

20 Parker, Kim and Eileen Patten, “The Sandwich Generation, Rising Financial Burdens for Middle-Aged Americans,” Pew Research Center, Social and Demographic Trends, 2013, http://www.pewsocialtrends.org/2013/01/30/the-sandwich-generation. 21 2018 Home Buyer and Seller Generational Trends, National Association of REALTORS® Research, https://www.nar.realtor/sites/default/files/documents/2018-home-buyers-and-sellers-generational-trends-03-14-2018.pdf. 22 U.S. Census, 2016 American Community Survey, Table B11017, https://factfinder.census.gov/bkmk/table/1.0/en/ACS/16_1YR/B11017


43

Grand-Families

4.5 million: The number of Americans children being raised by a grandparent23

U.S. Census data indicate that approximately 2.5 million U.S. grandparents are

raising 4.5 million grandchildren children. These grandparents have stepped into

a parenting role because their adult children are unable to care for their

children or are absent. Each situation is unique, but almost all involve painful

family decisions and circumstances, such as divorce, unemployment,

abandonment, incarceration, substance abuse, neglect, or death. Late-life

parenting can be physically, emotionally, and financially stressful. And housing

can be a problem if the grandparent lives in an age-restricted community that

does not allow extended stays for youngsters.

Solo Agers

30.5%: Percentage of Americans age 55–85+ widowed, divorced, separated24

7.9%: Percentage of Americans age 55–85+ never married25

More than one-third of older adults are on their own, either because of

remaining single or because of divorce, separation, or widowhood. As they age,

new trends can emerge in mutual help groups and living arrangements. For

example, couples living apart together in later life (LAT or LLAT) have a close

stable relationship but maintain separate households. Having past the years of

family raising, career, and perhaps caring for an ailing spouse, LLAT couple have

the benefits of cohabiting but remain independent.

It’s important for solo agers to strategize where they age and how they will

accomplish the daily tasks of living. Steps the solo agers can take to prepare

include getting paperwork in order—advance directives, powers of attorney,

wills—and tapping into a social network of people in similar circumstances.

23 U.S. Census, American Fact Finder, American Community Survey, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_16_1YR_S0201&prodType=table. 24 Table A1. Marital Status of People 15 Years and Over, by Age, Sex, and Personal Earnings: 2017, Current Population Survey, 2017 Annual Social and Economic Supplement, Revised: May 4, 2018, U.S. Census, https://www.census.gov/data/tables/2017/demo/families/cps-2017.html. 25 Ibid.


44

INCREASING LGBT CULTURAL COMPETENCE Kelly Kent, Director, National Housing Initiative, SAGE and Jeff Berger,

REALTOR®, Founder of National Association of Gay & Lesbian Real Estate

Professionals (NAGLREP)

Demographic Background

Older adults who are Lesbian, Gay, Bisexual, and/or Transgender (LGBT) are a large and growing segment of the older adult population. Lacking Census data, it is difficult to know the number of LGBT older adults living in the United States. However, recent research estimates that 2.4 percent of Americans self-identify as LGBT, including 2.7 million aged 50 and older, of which 1.1 million are 65 and older.26

Discrimination and Fear of Discrimination in Housing

A survey of 1,700 LGBT home buyers and sellers found that most respondents

believe homeownership is a good investment but have strong concerns when it

comes to housing discrimination.27 The study did not focus on actual

discrimination that had taken place but rather fears of respondents of potential

discrimination. In actual experience, about half (48%) of older same-sex couples.

A study by the Equal Rights Center found that one in four transgender older

adults encountered discrimination when applying for senior housing.28

Furthermore, seven in ten transgender respondents fear that as they grow older

they will need to hide their identity from housing and service providers. 29

There are LGBT older adults within all other minority communities and many

LGBT older adults grapple with discrimination based on their LGBT identity as

well as race or religion. Discrimination may take the form of a clear refusal to

offer housing to an LGBT person, or may take subtler forms such as refusing to

show a one-bedroom unit to two people of the same sex in a rental

environment, showing LGBT applicants less desirable units, or charging

additional fees during the mortgage lending process, requiring additional

paperwork and background checks, or refusing to use a transgender person’s

chosen name and correct pronouns. An AARP study found similar fears of

discrimination including discrimination by real estate professionals, home

26 Fredriksen-Goldsen, Karen et al., “Successful Aging Among LGBT Older Adults: Physical and Mental Health-Related Quality of Life by Age Group,” Gerontologist, 2015 Feb; 55(1): 154–168. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4542897 27 2015 LGBT Home Buyer and Seller Survey, Better Homes and Gardens and The National Association of Gay and Lesbian Real Estate Professionals (NAGLREP), https://naglrep.com/wp-content/uploads/2017/06/naglrep-lgbt-survey-2015.pdf. 28 The Opening Doors Toolkit: Fair Housing Self-Advocacy for Older LGBT Adults, The Equal Rights Center, 2015, https://equalrightscenter.org/wp-content/uploads/lgbt-senior-toolkit.pdf. 29 Maintaining Dignity: Understanding and Responding to the Challenges Facing Older LGBT Americans, An AARP Survey of LGBT Adults Age 45-Plus, AARP Research, 2018, https://www.aarp.org/content/dam/aarp/research/surveys_statistics/life-leisure/2018/maintaining-dignity-lgbt.doi.10.26419%252Fres.00217.001.pdf.

A Few Facts about

Same-Sex Couples

Number of same-

sex couples:

887,458

Homeowners:

65%

Both partners

employed:

60%

Median household

income:

$90,493

Source: U.S. Census Bureau, Table 1. Household Characteristics of Opposite-Sex and Same-Sex Couple Households: 2016 American Community Survey, https://www.census.gov/programs-surveys/acs


45

sellers, property owners, mortgage lenders, property management companies,

and neighbors. Furthermore, LGBT older adults are concerned about future

social supports, access to culturally competent medical care, and discrimination

in long term care settings. Concern rates were highest among transgender

respondents.30

Antidiscrimination Laws

Although there are still no federal housing protections based on sexual identity

and gender identity there are multiple anti-discrimination laws at the local and

state level. There are, however, certain protections through any federally

funded housing programs, including FHA backed mortgages. The Equal Access

Rule, instituted in 2012, Automatic Protections for Marital Status, Gender

Identity, Gender Expression, and Sexual Orientation for Federally Funded

projects. It’s important to learn the specific housing protections offered in your

local community or state. For a listing by geographic location go to

http://www.lgbtmap.org/equality-maps/non_discrimination_laws.

LGBT Cultural Awareness

The terms sexual preference or alternative lifestyle are often used to describe

the LGBT community. These terms should be avoided, as they both imply that

sexual orientation or gender identity are a choice or can be changed or cured.

Likewise, the term homosexual should be avoided, especially with older adults.

Over the years the term has taken a negative connotation because until 1973

homosexuality was considered a diagnosable psychological disorder, and the

word still carries stigma and fear. Younger LGBT people are reclaiming the word

queer and using it in a positive way. For many older adults this term still carries

a very negative connotation, and it is recommended that you do not use the

word queer unless the older adult has made it clear that it is a term they use.

LGBT Clients and Customers

LGBT respondents looking to purchase a home in the next three years are most

concerned about selecting a real estate professional who has an excellent

reputation (93%) and is LGBT-friendly (86%). Only 13 percent thinks it is very

important that their sales associate identify as LGBT. Also of note, 78 percent of

respondents said that being LGBT friendly is more important than a real estate

professional’s years of experience.

30 Ibid


46

ADVOCATES FOR LGBT OLDER ADULTS SUGGEST THE FOLLOWING:

Ensure that your non-discrimination policy includes sexual orientation,

gender identity, and gender expression. Post a version of the policy, written

in plain language, in your building entryways.

Train your staff on LGBT cultural competency including appropriate

terminology, the history of the LGBT experience, and the unique culture of

LGBT older adults. You can learn more about training at www.sageusa.care

Demonstrate dignity and respect if there is question by asking what gender

pronouns the individual prefers, which demonstrates your cultural

competency and sensitivity.

Advertise your services in local LGBT media and make it clear on your

website and promotional materials that you are open and affirming, or have

experience working with LGBT clients.

Join NAGLREP and add your profile to the directory of LGBT and allied real

estate professionals. NAGLREP.com receives 75,000 unique visits per month

from LGBT home buyers, sellers and referring agents.

Provide a link to the AARP’s downloadable Prepare to Care, A Planning

Guide for Caregivers in the LGBT Community. Go to www.aarp.org/pride.

SAGE is the nation’s oldest and largest organization advocating for LGBT older

adults. For more information on LGBT aging issues, go to SAGE National

Resource Center on LGBT Aging at https://www.lgbtagingcenter.org.

HOUSING CHOICES How do 21st century retirement trends and experiences impact housing choices?

How do trends affect the decision to buy or sell, age in place or move?

Staying Close to Home

Silents and baby boomers are staying close to home. About eight in ten plan to

stay in the same state or region. When continued work is an economic

necessity, proximity to employers who hire older workers becomes a compelling

factor for choosing a retirement location.

Baby boomers intend to age in place, but their housing needs will change as

they grow older. Along with retirement, top reasons for selling are moving to be

closer to family and friends and downsizing.


47

Active Adult Planned Communities

Age-restricted and active adult communities were designed for the mature (GI

and Silent) generations. For them, the ideal retirement was a time of withdrawal

from work and responsibility for a life of endless leisure in a warm climate. Most

of the retirement institutions in place today—health care delivery, government

programs, and expectations such as age milestones—were designed for this

concept of retirement. About 20 percent of baby boomers are interested in

senior communities according to research by Del Webb. Considering the size of

the generation, even the small percentage represents a huge market.31

Developers are responding to the changing demographics by building closer to

urban centers with access to job markets for retirees who continue to work, as

well as designing niche communities based on retirees’ special interests.

Examples of niche communities include Spruce Creek Airpark near Daytona

Beach or the Florida Latitude Margaritaville communities based on the laid-back

style and music of Jimmy Buffet. University based communities, such as Kendal

at Hanover at Dartmouth College, Holy Cross Village at Notre Dame, or Oak

Hammock at the University of Florida offer access to university-level life-long

learning and cultural events.

31 Hurley, Amanda Kolson, "The Subtle Shifts in Retirement Community Designs, Citylab.com, 2015, https://www.citylab.com/equity/2015/09/the-subtle-shifts-in-retirement-community-design/403723.


48

Home Buyers and Sellers Generational Trends

Reasons for selling (top 3)

Age 72–92 Age 64–71 Age 53–63 Moving due to retirement Job relocation

Be closer to friends, family Home too large, upkeep difficult

Reasons for buying (top 3)

Age 72–92 Age 64–71 Age 53–63 Be closer to friends, family Own a home Moving due to retirement Job relocation

Want a smaller home

Size of home purchased (square feet)

Age 72–92 1800 3 bedrooms

2 full bathrooms Age 64–71 1900

Age 53–63 1870

Median

Home sold and purchased, distance moved Sold Purchased Distance

Age 72–92 $247,000 $245,000 22 miles

Age 64–71 $274,000 $250.000 39 miles

Age 53–63 $264,000 $273,000 20 miles

Median

Equity and tenure in home sold

Equity Tenure 21+ years

tenure

Age 72–92 $60,000 (40%) 16 years 37%

Age 64–71 $86,000 (46%) 15 years 33 %

Age 53–63 $59,900 (30%) 13 years 23 %

Median

Purchased Senior-Related Housing

Purchased a Single-Family Home

NAR 2018 Home Buyers and Sellers Generational Trends, Research and Statistics, www.nar.realtor/ research-and-statistics/research-reports/home-buyer-and-seller-generational-trends

80% 81%

72%

Age 53-63 Age 64-71 Age 72-92

10% 9%11%

13%

45%48%

50% 51%

27% 26%

20%22%

6% 5%3% 2%

Age 72-92 Age 64-72 Age 53-63 All age 50+

Location of Home Purchased

Urb

an

Su

bu

rban

Sm

all T

ow

n

Res

ort

8%

17%

28%

Age 53-63 Age 64-71 Age 72-92


49

HOME—ASSET OR ANCHOR? The big question for current and future retirees is how much equity is in their

homes and to what extent will they be willing to use it to fund retirement

choices. The mature generations see their homes as the last place they would

ever give up or risk. The baby boomers, on the other hand, are more

accustomed to seeing real estate, including their homes, as part of a portfolio of

financial assets. They may be less hesitant than their parents’ generation to take

cash out of home equity through a line of credit or loan. A big question is

whether they will see their homes as an asset that can be tapped to support

their retirement years or echo the attitudes of the preceding generations who

would never put their homes at risk.

House Locked?

Following the economic recession, real estate values declined across the

country, with home values sinking below mortgage balances in some areas. But

for debt-free older homeowners, an upside-down mortgage may be less of an

issue than loss of value.

Although market conditions have, for the most part, recovered to near pre-

recession values, there are other considerations that may work to inhibit a

senior seller from downsizing or moving on. As a real estate professional, you

should work with these sellers to determine how comparable homes affect their

property’s value and acknowledge any inhibiting factors that the seller has

identified. After listening to the seller’s concerns, explain available options so

that they do not feel “house locked” in their current property. If sellers can

identify solutions based on your recommendations, it is likely that they will work

with you to achieve their goals


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What is your concept of aging in place? Most envision continuing to live safely,

independently, and comfortably in their own home and the familiar

surroundings of a supportive community.

Life-enriching aging in place is not a passive activity. It doesn’t result from just

staying put and adding up the years; according to AARP research, 8 out of 10

adults will experience future special housing needs. Successful aging in place is a

process of taking stock of current and future needs, thinking through the

options, evaluating the house and the community, and developing strategies.

The process starts with asking the question, what will you need to age

comfortably and safely in this house and in this community?

PLAN FOR AGING IN PLACE For many, where they live—the community or home—at retirement is where

they want to live out their lives. Does this mean that mature adults do not move

to new homes or communities? Some relocate before reaching an age or life-

stage milestone. Second-home owners may move to their vacation homes for

aging in place. Another trend is relocating to a future retirement residence and

commuting from there before full retirement. As we will see in this chapter, the

choice of where and how to age in place often depends on health and support

needs. We’ll look at how homes can be adapted for aging in place and discuss

the opportunities for real estate professionals in helping sellers, buyers, and

their families find solutions for aging in place. Let’s begin by looking at two

aspects of aging in place:

Aging in the community:

Remaining in a familiar community but in a more suitable residence—

condo, apartment, or different house—with friends, family, activities, and

support services nearby. Or relocating to a community that provides a safe

environment and needed services and support or moving closer to family.

Aging in the home:

Remaining in the current residence, accessing support services, and

modifying the home as needs change.

A plan for aging in place is not a plan for advanced old age or illness. It is a

portfolio of strategies for maintaining control of the environment and quality of

life. When family members participate in planning, they have an opportunity to

voice concerns, work through practical and emotional issues, and visualize their

future roles. Most important, they learn their elders’ wishes and preferences.


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PLANNING CONTINUUM FOR AGING IN PLACE

It may help to think of an aging-in-place plan in terms of a continuum based on

health and support needs. Where an individual fits on the continuum indicates

present and future actions, priorities, and how quickly decisions must be

implemented. Note that this continuum is tied to health, mobility, care, and

service needs, not specific ages. At every stage of the continuum, real estate

needs for aging in place change and create opportunities for real estate

professionals to work with buyers and sellers.

No Urgent Needs

Progressive or Chronic Health Conditions

Urgent Needs, Sudden Changes, Advanced

Conditions

There is time to think ahead, research options, develop strategies, and discuss choices with family members. Simple, universal design home modifications can enhance independent living and prevent debilitating accidents and falls. This stage may involve a planned move to a second home or active adult community. Community service needs: participation in events, volunteer opportunities, focus on maintaining involvement and an active lifestyle.

Changes in life and health circumstances necessitate home modifications or a move to a more suitable living arrangement. Although not urgent, gradual progression of conditions makes adaptations inevitable. There is time to research care options or move to a more suitable home or closer to family. Community service needs: support independent living, facilitate access to health care providers, and provide emergency response.

A sudden change in health or life circumstances requires immediate adjustments to the home and possibly the living situation. Progressive conditions reach advanced stages and require full-time care. Home modifications are needed to enable care and maintain safety. A full-time care provider or a move to a medically oriented care facility may be necessary. Community service needs: long-term medical care and care-provider support.


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AGING IN PLACE: THE COMMUNITY

What makes a community a good place to age in place? AARP offers the

following list of community attributes that support independent living for older

adults:32

Well-run community centers, recreation centers, parks, and other places

where people can socialize and participate in public meetings and events

Volunteer opportunities

Dependable public transportation; safe and convenient transportation

options available, such as rides from friends or family

Safe sidewalks that connect the places that people want to walk to

Roads designed for safe driving with unambiguous signage and clearly

marked traffic stops and pedestrian crosswalks

Range of housing options, including affordable housing, elsewhere in the

community if a resident wants to leave the current home

Naturally Occurring Retirement Communities

Not all 50+ communities are planned developments; some happen naturally as long-time residents of a neighborhood age in place. About one in four mature adults live in a naturally occurring retirement community (NORC). Except for the age of the residents, there are seldom any other defining characteristics. NORCs occur in small towns, suburbs, and rural settings. They can be a community, an apartment building, or a section of a neighborhood and are increasingly common in rural areas where young people migrate to cities for job opportunities.

NORCs develop when long-time

residents of a neighborhood

age together in the same place.

32 Adapted from “Beyond 50.05: A Report to the Nation on Livable Communities,” www.aarp.org.


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RETIRING TO YOUR HOME

Reprinted with permission of National Association of REALTORS®, excerpt from On Common Ground,

https://www.nar.realtor/on-common-ground.

https://www.nar.realtor/on-common-ground


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Aging in the Community Checklist

When working with clients and customers, use this checklist to evaluate a community or neighborhood

for aging in place. You should stress that all listed items should be considered and that you are not

claiming expertise in all items (e.g., medical).

Medical Health care facilities, doctors, hospitals, clinics,

specialists Prescription drug plans Emergency services

Market Range of housing options and prices Resale value and appreciation potential

Transportation Transportation—public and private volunteer Roads Traffic volume Golf cart sales and service Airport proximity and airline service Parking

Community and Activities Public safety Planned communities Employment opportunities Volunteer opportunities Popular activities and hobbies Cultural and educational institutions Opportunities for civic engagement Houses of worship Camaraderie with privacy Quality of life Attitude of locals toward “snowbirds”

Fitness Exercise programs Pool, golf, spas, wellness facilities Walking trails and paths

Cost of Living Overall costs Utility costs—electricity, gas, water Taxes—property, income, sales

Climate Changes of season and climate variations Likelihood of destructive storms and natural

disasters Environmental quality Natural features: parks, coastlines, mountains,

scenery

Services Shopping (quality, selection, convenience) High-speed Internet access Restaurants (range of prices and types)

Senior and Aging Services Senior concierge services Nutrition (meals on wheels) Senior-specific places, communities, facilities Aging and human services Independent living support Congregate, assisted, skilled care, nursing

home facilities

Properties Maintenance-free (no lawn care, snow

removal) Storage space Alarms in bedroom/bathroom Garage or parking Square footage Barrier free—no thresholds, wide doors and

hallways No fall hazards Age-restricted, age-targeted, NORCs


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How does your community rate for support of aging in place?

Check out the livability score of your community at AARP’s Livability Index at

https://livabilityindex.aarp.org.

AGING IN PLACE—THE HOME

What makes a home suitable for aging in place? A survey of generational

preferences by the National Association of Homebuilders found that baby

boomers and silents favor the following home features.33

Suburban or near suburban location

Single-family detached home

1 level, 2-car garage

3 bedrooms, 2–3 bathrooms, full bath on the main level

Open kitchen and family room

Separate living room

Median size of 1,900 square feet or less

Expected price of next home of $220,000

33 Housing Preferences Across Generations, NAHB Economics and Housing Policy Group, Special Studies March 1, 2016, https://wdn.ipublishcentral.com/ national_association_home_builders/viewinsidehtml/746901096336991.

https://livabilityindex.aarp.org/


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UNIVERSAL DESIGN STANDARDS Universal design is the creation of products and environments so that they are

usable by all people to the greatest extent possible. Universal design features

can make it possible for an aging homeowner to remain comfortably and safely

in the home on an independent basis and for a longer time. Real estate

professionals should be aware of this growing trend in home construction and

highlight these design features when helping 50+ buyers search for a home.

Buyers may not be aware of the benefits of universal design in home design or

fully appreciate how these features enhance present comfort and support

future aging in place.

7 Universal Design Principles34

1. EQUITABLE USE

Same means of use, or equivalent, designed for people with diverse

abilities, appealing to all users, not segregating or stigmatizing any users

Privacy, safety, and security equally available for all

2. FLEXIBLE USE

Accommodates a wide range of individual preferences and abilities

including both left- and right-handed users

Adapts to user’ space and aids the precision

3. SIMPLE AND INTUITIVE

Use of the item easily understood independent of experience, language,

knowledge, or ability to focus

Consistent with user expectations and intuition

Information arrangement reflects importance

4. PERCEPTIBLE INFORMATION

Design that communicates what the user needs to know independent of

the surrounding conditions or the user’s senses, such as hearing

Provides the information several ways, such as verbally, visually, by

touch for the blind, and in large print for those with impaired vision

34 Center for Universal Design, College of Design, North Carolina State University, https://design.ncsu.edu.


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5. TOLERANCE FOR ERROR

Minimizes hazards and provides warnings

Minimizes consequences of accidents and mistakes and provides fail-

safe features and a means to correct mistakes, such as a cancel button

6. LOW PHYSICAL EFFORT

Reduces repetition and sustained effort

Requires only reasonable operating force

Allows user to maintain a neutral, normal body position, with little or no

bending

7. SIZE AND SPACE FOR APPROACH AND USE REGARDLESS OF BODY SIZE, POSTURE, OR MOBILITY

Clear line of sight for standing or seated user

Components reachable from a seated or standing position

Accommodates variations in hand and grip size

Allows user to approach, reach, or manipulate in the appropriate space,

such as doors and hallways wide enough for wheelchairs and reduced-

height or extended counters to accommodate people of small stature or

in wheelchairs.


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ADAPTING A HOME FOR AGING IN PLACE

Bathroom

Tub and shower controls offset

Light in shower stall

Shower stall with low or no threshold, trench drain

Fold-down shower seat

Hand-held showerhead with 6' hose

Lift or transfer seat for bathtub

Lower bathtub for easier access

Grab bars at back and sides of shower, tub, and

toilet, or wall-reinforcement for later installation

Adapter to raise toilet seat 2½"–3" higher than

standard

Turnaround and transfer space for

walker or wheelchair (36" x 36")

Knee space under sink and vanity

Counters at sit-down height

Emergency alert or call button

Faucets, Switches, Controls

Temperature-controlled or anti-scald valves for

faucets

Lever faucet handles

Easy-to-read, pushbutton controls

Lever door handles

Loop drawer handles

Easy-to-read, programmable thermostat

Rocker light switches at each room entry

Lighted switches in bedrooms, bathrooms, and

hallways

Light switches at 42" from floor

Electrical outlets 15"–18" from floor

Front controls on cooktop


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Entry and Stairs

At least one entry without stairs

36"-wide doorway with offset hinges

Side window at entrance or lowered peephole

Handrails on both sides of stairs

Outside stair height below 4"

Contrasting strip on stair edge

Ramp slope of no more than 2" per 12" in length, 2" curbs, 5'

landing at entrance

Low (maximum ½" beveled) or no threshold

No mats or throw rugs

Exterior sensor light focused on door lock

Surface inside doorway for placing packages

Audible doorbell

Flashing porch light

Kitchen

Cabinets with pull-out shelves and turntables

Wall cabinets set below (about 3") standard height

Glass cabinet doors or open shelving

Easy-to-grasp cabinet knobs, pulls, or loop handles

Task lighting under cabinets

Electric cooktop with front controls and hot-surface

indicator

Microwave at counter height

Wall oven or side opening oven door at counter height

Counter space for transferring items from refrigerator,

oven, sink, and cooktop

Contrasting color strip on counter edges

Side-by-side refrigerator/freezer with adjustable upper

shelves and pull-out lower shelves, or a freezer drawer

on the bottom

Raised dishwasher

Variety in counter height—some at table height (30")—

under-counter seated work area

Gas sensor near gas appliances


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Home Design and Layout

Easy-open windows with low sills

Color contrast between walls and floors, matte finish

wall coverings

Adequate, accessible storage

Wide halls and doorways (interior doors and hinges can

be removed)

“Flex room” for family visits or live-in care provider

Attached garage with opener or covered carport, room

for wheelchair loading

Smoke and carbon monoxide detectors

Low-vision adaptations:

Anti-glare glass

Stick-on, tactile markers on controls

Contrasting color switch plates

Electrical-plug pullers

Home Care

Low-maintenance exterior (vinyl siding)

and landscaping

Housekeeping service

Repair service

Security and emergency alert service

Uncluttered, unobstructed exterior and

interior pathways

Easily accessible filters on HVAC units

Central vacuum system


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What additional aging-in-place adaptations can you think of? Which

are low-cost or DIY items?

MAKE A SAFE PLAN FOR AGING IN PLACE When is a house, or a community, suitable for aging in place, and when is it right

to consider a move to another home or neighborhood? Remember these four

factors:

In the Community In the Home

Safety Does the neighborhood seem

unsafe? Are elderly residents

afraid to leave their homes? Is

the neighborhood declining?

Does the home have elements

that present risk, such as dim

lighting, steep stairs, no hand

rails, clutter, frayed wiring, or

structural problems?

Access Are shopping and services

accessible? Can the resident

easily access essential services—

grocery store, pharmacy, house

of worship, medical services, or

bank—without driving?

Are family and friends close by

or far away? Will an elderly

person be isolated and trapped

in the home? Is entry awkward

for the home or other areas?

Are cabinets, closets,

appliances, and storage

accessible?

Fits

needs

Does the community provide

support for aging in place? Is the

climate tolerable year-round?

Does the house still fit the needs

of the homeowners? Can the

owners handle the repair and

maintenance needs of an older

house?

Ease

of use

Does the community

infrastructure promote ease of

movement?

Can doors and hallways

accommodate a walker or

wheelchair? Can home features

be added or modified?


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OPPORTUNITIES FOR REAL ESTATE PROFESSIONALS As we have seen, home preferences and needs change as we age in place. The

“no urgent need” phase of the continuum may involve moving to an active adult

community, relocating to a better climate, or downsizing to a more manageable

home that frees the homeowner from maintenance responsibilities. The other

end of the continuum may involve helping a family sell an elderly relative’s

home. At every stage, real estate professionals have opportunities to work with

sellers and buyers as they make transitions. How can real estate professionals

help clients and customers plan and make the right choices for aging in place?

Share stories of how others have solved problems.

Help buyers evaluate a home, neighborhood, or community.

Discuss aging-in-place needs during buyer-counseling sessions.

When showing a home, point out the features that support aging in place.

Inform clients, customers, and their families of community services that

support aging in place.

Influence the community to develop aging-in-place support services.

What other opportunities can you think of?

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Whether aging in place or moving to a new residence, the first phase of the 50+

market housing cycle involves independent living. For many, an age-targeted

community is the answer. The amenities, social activities, and freedom from

home maintenance offer the independence and security that fits the

preferences of many in the 50+ generations. The privately owned residences are

real estate assets, and providing services for buyers and sellers presents an

opportunity for real estate professionals.

Real estate professionals who work in markets that include age-targeted

communities and buildings need to know about housing options, amenities, and

policies. You can start by researching the communities, developments, and

housing options in your market area and learning about the opportunities.

THE HOUSING CYCLE Most seniors stay in their own homes in their 70s and 80s. When they do move

they relocate close to home and into smaller houses, apartments, condos, or

congregate or care settings. Assuming the trend for retirees to stay close to

home continues, the senior population of the next 10 to 15 years will likely be

geographically distributed in proportion to where baby boomers and their

parents now live. Closeness to adult children, whose careers are based in the

metro area, is a top consideration.

Experienced real estate practitioners describe retirement and home

ownership in four stages:

Upsize: Age 50

Pre- to early retirement. Preference is for a large house with room for the

grandchildren and other guests.

Downsize: Age 65

At this stage the grandchildren are teenagers or in college and are no

longer interested in spending spring break or summer vacation with their

grandparents. Adult children are involved in careers and do not have

much time to visit either. The trend is to downsize to a more manageable

property.

Half-back: Age 70–75+

Health begins to weaken. The spouse and friends may pass away and

community ties weaken. Elderly move back home, or half-back, to be

closer to children. Family members or adult children may be involved in

this transaction.


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Last home: Age 80–85+

The last move may entail selling the house or condo and moving to

independent senior communities that have continuum of care; in other

instances, seniors may need to transition to an assisted-living facility.

Expect the adult children to be involved in this transaction.

Over the course of their retirement years, mature adults may sell and buy

property several times as they progress through life and health stages. By

demonstrating your knowledge and ability to help them through the

transactions, you can gain a client for life. Mature adults are more likely to tell

others about good and bad service experiences. What would you like these

clients to say about doing business with you?

The opportunity for real estate professionals is that as a group, mature adults

will sell and buy, upsize and downsize, move to a new location and move back

or half-back to be close to family, move to assisted-living environments, and the

like over 20 or more years and as their lives and circumstances change. The real

estate professional who can win the client early on has the opportunity to

benefit from several transactions in the future. SRES® designees can attest that

people in their 50s start thinking about aging and issues with property for

themselves and their elder parents. When selling to this group, be cognizant

that you can become their real estate professional for life by demonstrating

your understanding and familiarity with the circumstances of their property and

lives and your ability to help them through the phases.

ACTIVE ADULT COMMUNITIES Communities welcome active retirees because they make the area attractive to

other high-income retirees who add to the tax base and make few demands on

community services.

Active adult retirement communities come in a variety of forms:

Single-family homes

Attached homes, duplexes, townhomes

Condominiums

Manufactured and mobile homes in a park, real estate owned or leased—

popular with “snowbirds”

Cluster housing that combines the maximum density of homes with large

common areas, such as gardens, clubhouses, tennis courts, swimming

pools, and community centers

Subdivisions

Exam Question 18


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Cruise ship condominiums

Who buys into these communities? The Del Webb Company, the largest

developer of U.S. retirement communities, characterizes the active adult

consumer profile as follows:35

Socially, physically, and philosophically active

Technology-adept early adopter

Preference to be surrounded by “people like me”

More motivated by lifestyle than the actual house in choosing a

retirement home

Although concentrated in the South and West, active adult communities are

located throughout the country. Some of Del Webb’s newest active adult

communities are located close to metro areas for retirees who prefer a city

environment.

Active adult communities may offer a try-before-you-buy option for a short-

term stay at the facility. Potential residents have an opportunity to try out the

community facilities, get a feel for the atmosphere, meet other residents, and

evaluate whether it is a good fit for them.

Active adult communities offer a range of services, social events, amenities, and

activities to attract and serve residents. Services and amenities might include:

Social and recreational programs

Community center or clubhouse

Fitness facilities

Computer labs

Hobby and workshop facilities

Gardening plots

Libraries

Cultural and arts programs

Transportation on a schedule

Worship facilities, spiritual

counseling

Continuing education programs

Support groups

Outside maintenance and

referral services

Emergency and preventive

health care programs

Restaurants and meal

programs

35 Del Webb, “Key Trends and Shifts in Retirement,” Baby Boomer Survey.


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A National Association of Home Builders research study found that the most

desired amenities in an active adult community are:

Walking and jogging trails

Outdoor spaces

Public transportation

Lakes

Outdoor swimming pools

Security

Clubhouses

Exercise rooms

Business centers

Even if residents do not take advantage of all the amenities, they do understand

the value enhancement, particularly if they have a real estate ownership

interest in the community, such as a condominium or single-family home.

SENIORS APARTMENTS According to U.S. Census data, about one in five seniors are renters, either

always renters or former homeowners who sold their properties to become

renters. Reasons for becoming renters include circumstances such as:

Divorce (dividing equity)

Financial inability to pay mortgage, taxes, insurance, upkeep

Relocation closer to family and grandchildren (younger families often move

for job-related reasons)

Ability to free up equity for investment income

Freedom from home and garden maintenance

Freedom to travel

Seniors-only apartments suit those who can take care of themselves, are

relatively healthy, have sufficient funds to buy or rent the apartment, and want

to maintain independence and privacy. They offer social opportunities, comfort,

safety, and security, but no medical or custodial care. As noted earlier, some

apartment buildings become de facto senior housing by virtue of the age of the

residents.

The apartments, rental or condo, are usually small and easy to maintain. The

design may include assistive features such as shower seats, handrails, and

emergency alert devices. Residents may have access to services such as

recreational programs, transportation, and communal dining rooms.


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Some seniors-only apartments qualify as low-income housing and charge below-

market rents based on a set percentage of the resident’s income. These

apartments are subsidized by HUD, states, or community grants. HUD

affordability guidelines require expenditure of no more than 30 percent of the

county’s median income for housing. There is usually a long waiting list to move

into one of these facilities due to low turnover. Communities can encourage

construction of low-income senior housing through incentives, tax credits, and

zoning variances.

COHOUSING Cohousing communities are better characterized by philosophy and lifestyle

than by layout or styles of residence. They are self-contained, intentional

neighborhoods of privately owned residences, such as single-family or

townhomes, clustered around a courtyard and community center. Most are

small, typically 10–30 residences, and may be multi-generational or adult-

focused. From outward appearance, cohousing developments look like any

other clustered neighborhood; the emphasis on sharing and communal living

distinguishes the close-knit communities. Shared meals prepared by community

member volunteers and served several times a week in a communal dining

room are a distinguishing feature. Another is decision-making by consensus. The

cohousing approach harmonizes quite well with green living; mission

statements of the communities stress wise use of resources and environmental

stewardship through sharing as a community value.

Sunward Cohousing in Ann Arbor, Michigan, consists of 40 homes clustered on five acres. Tightly grouped housing and parking on the periphery preserves the

surrounding green space.


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Adult-focused cohousing communities offer independence and the privacy of a

single-family home within a supportive community environment. According to

the Cohousing Association of the United States, the distinguishing

characteristics of elder cohousing are:

For new developments, future residents participate in designing the

community to meet their needs.

Common facilities designed for daily use are an integral part of the

community and are always supplemental to the private residences.

The neighborhood design encourages a sense of community.

Residents manage their own communities and do much of the work

required to maintain the property.

The community is governed by a homeowners association with an emphasis

on decision making by consensus.

The community and its services are not profit-making enterprises or a

source of income for its members.

AGE-RESTRICTED COMMUNITIES Age-restricted communities provide an environment in which seniors can meet

and make friends with people of the same age group and use facilities like

swimming pools and clubhouses in a peaceful atmosphere. But, for buyers who

have always lived in a single-family home, getting used to restrictions can be an

adjustment.

When working with clients who are interested in age-restricted communities,

the real estate professional should alert prospective residents about the

regulations and restrictions. For example, are pets allowed? How long can

grandchildren and guests stay? Are there restrictions on children using facilities?

Most age-restricted communities try to find a balance so that residents can

enjoy both the community benefits and the company of children and

grandchildren. For example, grandchildren or underage children can usually stay

for up to several weeks, although the allowance varies widely from facility to

facility. On the other hand, residents may be grateful for the age restriction that

prevents an adult child from moving in with parents, thus avoiding an awkward

situation.

As a real estate professional, you should learn about the age-restricted

communities and facilities in your market area. Make an effort to become

familiar with the rules and covenants and get acquainted with the HOAs, their


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officers, and staff. Demonstrating your ability to work with the community and

bring qualified clients to it can result in referrals.

Is it the responsibility of the real estate professional to verify a client’s eligibility

for age-restricted housing? Real estate professionals must inform clients if a

property is age-restricted and advise them that they will be expected to comply

with community policies. But there is no obligation to verify a prospect’s age or

eligibility.

NAR strongly suggests that before the MLS advertises any property as housing

for older persons, it should require the listing broker to provide the MLS with a

copy of the written statement of qualification on which the broker is relying.

When working with buyers or sellers in an age-restricted community, a real

estate professional should ask to see the community’s statement of policies and

keep a copy in the transaction file. Check with your MLS for guidelines on

advertising. The advertising phrases “qualified housing for older persons” or

“community intended for those 55 and older" are preferable; phrases such as

“adult living” or “adult community” generally should be avoided because they

are not consistent with demonstrating the intent required by the federal

Housing for Older Persons Act (HOPA).

HOUSING FOR OLDER PERSONS ACT HOPA allows age-restricted housing by carving out an exemption to the federal

fair housing law prohibition against discrimination on the basis of familial status.

For all levels of age restriction, it is important to note that the requirements

apply to the occupants, not the owners. Federal law sets forth two levels of age-

restricted housing:

55+ housing

80 percent of units must be occupied by at least one person age 55 or older per unit.

Maximum 20 percent of units may be occupied by residents under age 55.

62+ housing

All residents must be at least age 62.

The facility must publish, and adhere to, policies and procedures that

demonstrate the intent to provide housing for older persons.

Residents’ ages must be verified through reliable surveys or affidavits.

No programs of planned activities are required for either 55+ or 62+

housing.

I-Note: OBSERVE that

age-restricted

communities are HOPA

in action. STATE that

real estate

professionals are not

required to verify the

age eligibility of

prospects. They must

inform the prospect

that the facility is age

restricted and age

criteria must be met.


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More Restrictive Limits

If state law allows, facilities may establish more restrictive age limitations such

as 80 percent of the units must be occupied by at least one person age 60 or

older, or exclusively by persons age 55 or older, or all units must be occupied by

at least one person age 55 or older.

80/20 Occupancy Requirement

The 80/20 rule prevents loss of exemption due to situations in which a surviving

spouse or heir wants to occupy the unit. Units in the 20 percent portion are not

marketed to prospective occupants who are underage. A healthcare attendant

or family-member care provider is excluded from the calculation, whether the

live-in care provider resides in the same or a separate unit. As noted above, the

occupants of the units are counted, not the owners. If an age 55+ owner or

occupant vacates a unit for a period of time and rents it to an underage

individual, the tenant would be counted in the 20 percent portion. The age 55+

occupant may, however, be absent for a time (vacation, hospitalization, or

seasonal absence) without jeopardizing the exemption status of the community.

The community may restrict use of facilities,

such as a swimming pool, by children and restrict how long children may stay as guests with the unit owner or occupant.

? Discussion Question What age-targeted communities are located in your market area?

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When health or life circumstances change, living arrangements may need to

change too. Homeowners, and their families, experiencing such a life transition

want a living arrangement that maintains privacy and an appropriate level of

independence but also provides safety and security. Choosing an appropriate

level of care begins with an objective assessment of needs and capabilities.

Normal, healthy aging does not necessarily require a medically oriented

environment, but declining strength, stamina, mobility, and mental acuity may

necessitate assistance for accomplishing some daily activities, like meal

preparation.

Where does the real estate professional fit into this picture? Selling a longtime

home may be part of the transition to an assisted-living arrangement, and

families may be unaware of the options that are available in the community. A

specialist can provide helpful insight on how others have made similar

transitions, information on helpful services, and assurance that a successful

transition can be accomplished. Some congregate, assisted, and continuing-care

facilities work with real estate professionals. When a resident needs to sell a

home, a specialist who has a reputation as a trusted and understanding

resource may receive a referral from the facility.

WHEN IS IT TIME TO MAKE A TRANSITION? The ability to perform key activities of daily living (ADLs) provides an objective

standard to determine the right time for making a transition and choosing the

right level of care and type of facility. The list can also guide decisions about

aging in place and in-home assistance.

Activities of Daily Living

Bathing

Dressing

Toileting

Eating

Transferring (e.g., moving from a bed to a chair)

Maintaining continence

Instrumental ADLs, a secondary list, are required activities for independent

living; some examples are using the telephone, grocery shopping, doing laundry,

and managing medications.

Up to age 85, most people report little or no difficulty with ADLs and about one-

third of those who experience an ADL disability recover. After age 85, more than

three-quarters report some degree of permanent limitation, and more women

than men report more limitations.


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DOWNSIZING Perhaps the most daunting aspect of downsizing, even for those looking forward

to a new living situation, is sorting through and getting rid of a lifetime’s

accumulation of stuff. When the health and safety risks outweigh remaining in a

home, it’s time to find another living situation. But even when events are not at

crisis stage and everyone, including the homeowners, agree on the need to

make a transition, taking action can run up against some challenging obstacles—

physical and emotional. What stops people from making a transition to a new

living situation?

Obstacles

Fear of change and loss of familiar routines that define and give meaning to

daily life

Fear of loss of independence, control, and privacy, or fear of abandonment

Fear of making a wrong and irrevocable decision

Emotional attachment to a home or place—adult children may be more

sentimentally attached and resistant to breaking up a family home than

their parents

Determination to hold on to a property so that heirs inherit it

House locked financially or by deferred maintenance issues

Physical and cognitive limitations that prevent taking action

Realization that a move is to a last living situation and remaining time is

short

Overwhelmed by the tasks involved in selling and moving

Lack of family or a support network to assist

Misapprehension that remaining in the home is “living for free”


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What Can a Real Estate Professional Do?

Acknowledge the challenges and conditions that prevent making a move.

Respect that what seems like a minor problem to you or other family

members may loom large for an elder homeowner.

Offer assurance that obstacles can be overcome and describe how others

have handled similar situations.

Provide information about resources, services, and expert guidance

including a trustworthy provider list, or team of professionals, who are

backed by the Better Business Bureau (BBB).

Acknowledge wary seniors and provide them with your credentials to build

trust in your expertise.

Know the Terminology

DOWNSIZE Reducing household inventory in preparation for a move to a smaller home.

DECLUTTER Removing accumulated items that make a home unsafe and unhygienic. Focus

on fire and fall prevention and removal of hazards.

DISBAND Dismantling the entire household.

Can Family Help?

Families can be a loving support when relatives make a transition. In the best

circumstances, the elder relative is in control and family members provide

support and elbow grease. But family members may live far away or might be

juggling career and family demands and are unable to offer much help. On the

other hand, family members may become over-assertive and completely

disregard the relatives’ feelings, attachments, fears, and preferences. There are

times, however, when family members must step in and take control for the

health and safety of the elder relative, when the elder is incapacitated physically

or cognitively, or when a deadline looms such as a closing date or admittance to

an assisted-living facility. Experienced specialists can probably describe

numerous examples along the spectrum between assisting and asserting.


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Downsizing Strategies

Space Planning

Subtract the square footage

of the future home from the

current home.

Add in new square footage

like a den, deck, or sunroom.

Measure furniture to be

moved to ensure fit.

Ask if the facility—senior

development, assisted living,

continuing care—can

provide space-planning

assistance.

Sort into Categories

Use various colors of Post-It

Notes® to help sort items into

categories:

Move

Maybe—move and decide

later

Sell—at auction, estate sale,

yard sale

Give away—to family

members or friends

Donate—to charitable

organizations

Throw out

Assess Future Needs

Is it family-sized?

Items like large camping

tents probably won’t be

needed.

Will it fit?

Compare size and square

footage; a space planner can

help.

Is it house-oriented?

If moving to a condo or

townhouse, get rid of lawn

mowers, snow blowers, and

large gardening tools.

Throw-Out Strategies

Resist the “maybe we’ll need

it sometime” mindset.

If it hasn’t been touched for

more than a year, throw it

away.

Consider if it’s worth the

cost and effort to pack,

move, and unpack.

Still can’t decide? Put it in a

sealed, unlabeled, and dated

box; if unopened a year

later, throw it away,

unopened.

Give Keepsakes to Children

Give childhood arts, crafts,

and family photos to

children; they may cherish

them and use them to start

their own family traditions.

Receiving meaningful

keepsakes may ease the pain

of breaking sentimental ties

to the family home.

Ask children to sort items:

Take now Take next time Give away Throw away

Managing Time

Allow time: Most downsizing

processes take 2–3 months.

Start early: Begin the

process before the house is

listed. If it sells quickly, there

will be less time for

accomplishing the tasks.

Schedule: Set a schedule by

room, week, month, or

other milestones.

Take time: Spreading out the

process makes it less

emotionally wrenching.

Can Family Help?

Some families assist, and some assert.

A good indicator is the way a family behaves during Thanksgiving or while making vacation plans

together.

Prepare to Feel Good

When the process of downsizing is complete, most people feel relieved and good about reducing the

amount of accumulated stuff.


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Professional Assistance

When the tasks of sorting, packing, moving, and unpacking are beyond the

capabilities of homeowners and their family, or events necessitate a quick

move, a specialist in senior transitions could be the solution. These

professionals, such as a Certified Relocation and Transition Specialist (CRTS®),

handle all the phases and tasks of downsizing, moving, decluttering, or

disbanding a senior’s home. They can sort through all the stuff, arrange for

dispersal and disposal of items, prepare a space plan to make sure furniture will

fit in a new living situation, pack, and unpack. Fees may be on an hourly basis,

by task, or for an entire project, and it is wise to ask for an estimate of costs

before making a commitment. For more information about these professionals,

go to the CRTS® website at www.crtscertification.com.

Decluttering

In some circumstances, out-of-control clutter threatens the health and safety of

homeowners. Decluttering a home may enable elderly family members to

continue living in their own home. However, clutter may also signal underlying

emotional or cognitive problems. It may be necessary to move the homeowner,

and pets, to the new living situation before the decluttering process can be

accomplished. How can a family begin the decluttering process?36

Focus on safety first by removing fall and fire hazards.

Start small and slow. Unless a deadline is imminent—eviction, closing

date, admittance date to a nursing home or senior apartment—working at

the elder’s pace lessens the stress. Start small by cleaning a corner of a

room or a tabletop.

Remove discarded items immediately so that they cannot be “resaved” by

the elder.

Reorganize items into a limited number of categories—keep, sell, give

away—to help initiate the process and make it easier to throw out items.

Negotiate and compromise over what to keep or discard. It may be OK to

keep the past couple of years' worth of accumulated magazines and

discard the previous 10–20 years’ worth.

Photographs of memorabilia, which the elder can keep, may make it

easier to let go of and disperse sentimental items to other family

members.

36 Adapted from “Best Practices: Decluttering Tips,” Weill Medical College of Cornell University, Department of Environmental Geriatrics, www.environmentalgeriatrics.org.


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Safeguard valuables as they surface, such as jewelry, works of art,

authentic and valuable antiques, and collectibles.

When the job is completed, make a plan for maintenance so that the

home doesn’t become recluttered.

Hoarding

Hoarding is often a symptom of dementia and extremely impaired judgment.

“Individuals with dementias are continuously losing parts of their lives. Losing

a meaningful role in life, an income, friends, family, and a good memory can

have an impact on a person’s need to hoard or to ‘keep things safe.’ Hoarding

… is oftentimes triggered by the fear of being robbed.” People with dementia

may hide possessions for safekeeping, forget where they hid them, and blame

others for stealing them.37 For authoritative research and information about

hoarding, including tips on dealing with clutter, rummaging, and hoarding, go

to the website for the Department of Environmental Geriatrics of Cornell

University: www.environmentalgeriatrics.org.

CONGREGATE LIVING Congregate living (also known as residential care, custodial care, or support

housing) combines independent living and privacy with the safety of round-the-

clock supervision care. The facilities offer fully equipped private apartments

ranging from one-room studios to two-bedroom units and common areas where

residents can socialize. Most units rent on a monthly basis.

Services may include cleaning and laundry service, transportation for medical

appointments and shopping, and social activities. Meals served in a common-

area dining room are usually included in a monthly rental, but residents have

the option to prepare meals in their own apartments. Most importantly, a staff

person is always available to assist residents and check on their well-being.

Medical care is generally not available, although staff may assist residents with

self-medication.

Congregate facilities may have entry criteria for age and abilities as well as rules

for when a resident must transfer from the facility. For example, a resident in

early stages of Alzheimer’s disease may be accepted but expected to transfer to

a specialized facility in later stages.

37 Rosemary Bake, and Paulette Michaud, “Working with Individuals with Dementia Who Rummage and Hoard,” Department of Environmental Geriatrics, Weill Medical College of Cornell University, www.environmentalgeriatrics.org.



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ASSISTED LIVING Assisted-living facilities provide a residence for those who need help with daily

activities such as cooking, housekeeping, and transportation, as well as personal

care such as bathing, dressing, grooming, and eating. They are best suited for

those who are ambulatory and do not need nursing care but cannot live on their

own. Living arrangements are usually a small apartment or a single or double

room, which offers more privacy than a nursing home environment but less

than congregate housing.

Assisted-living facilities should be expected to offer:

Laundry services

Transportation

Personal care

Housekeeping

Shopping

Exercise classes (usually seated)

Help with medications

Activities (social, religious, educational)

Three meals daily with provisions for low-sodium, diabetic, and heart-

healthy menus

When Is Assisted Living the Right Option?

Some signs that indicate a need for assistance include:

Personal hygiene declines, such as not bathing, wearing the same clothes, or

sleeping in clothes.

Responses to questions about well-being are passive.

A home that was formerly neat becomes disordered and dirty.

The refrigerator and pantry look empty, or an over-reliance on take-out

food becomes apparent.

Lethargy or fatigue replaces activity.

Forgetfulness that causes peril, such as food left cooking on the stove,

phone off the hook, bills unpaid, and medications skipped.

About three-quarters of those age 85 and older report some

degree of permanent limitation in

performing ADLs.


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CONTINUING CARE RETIREMENT COMMUNITIES Continuing care retirement communities (CCRCs) offer increasing levels of care

at one location as the needs of the resident change. It provides the choice of

moving between the housing environment and degrees of service within one

community, as well as the security of being taken care of through stages of

health and aging. CCRCs provide a solution to the problem of how to secure and

pay for future long-term care, as well as how to choose a facility at a time of

vulnerability.

Contracts for CCRCs

According to the U.S. Government Accountability Office, CCRCs typically operate

under one of the following types of contracts:38

Type A/Life Care: includes housing, residential services, amenities, and

unlimited use of health care services with no (or minimal) increase in fees. A

substantial entrance fee is usually required, but monthly payments do not

increase.

Type B/Modified: same housing and residential services and amenities as

Life Care, but health care services are limited, such as 60 days of nursing

care. Fees increase when a resident’s care needs exceed included services.

Type C/Fee-for-Service: same housing and residential services and

amenities as Life Care, but health care expenses are paid by the resident on

an as-needed basis.

Type D/Rental: a pay-as-you-go option and typically the least expensive. No

entrance fee is required. The resident pays all health expenses, but access

to CCRC health care services is guaranteed.

38 U.S. Government Accountability Office, “Older Americans, Continuing Care Retirement Communities Can Provide Benefits, but Not Without Some Risk,” Report to the Chairman, Special Committee on Aging, U.S. Senate, www.gao.gov.


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Range of CCRC Fees by Contract Type

Type A

Life Care

Type B

Modified

Type C

Fee for

Service

Type D

Rental

Entry

fee

$160,000–

$600,000

$80,000–

$750,000

$100,000–

$500,000

$1,800–

$30,000

Independent

living monthly

fee

$2,500–

$5,400

$1,500–

$2,500

$1,300–

$4,3000

$900–

$2,700

Assisted living

monthly fee

$2,500–

$5,400

$1,500–

$2,500

$3,700–

$5,800

$4,700–

$6,500

Nursing care

monthly fee

$2,500–

$5,400

$1,500–

$2,500

$8,100–

$10,000

$8,100–

$10,000

Source: Report to the Chairman, Special Committee on Aging, U.S. Senate, GAO-10-611, U.S. Government Accountability Office

Paying the CCRC entrance fee may use up a life’s savings or the entire proceeds

from the sale of a home. Like any major investment, it requires careful

evaluation of the facility, its services, and its financial condition. An attorney

should review the contract, in particular the policy on return of deposits; some

CCRCs refund a resident’s deposit only when a new resident buys in or a unit is

reoccupied. In a slow market, when a resident must wait for a home to sell

before moving into the CCRC, refund of a deposit can be delayed for several

years.

In addition to checking financial conditions and policies, prospective residents

should investigate the facility’s policies regarding involuntary transfers to higher

levels of care, life changes such as a marriage or death of a spouse, and

affiliation with any religious or charitable group.

CCRC facilities are state-regulated. Hearings before the U.S. Senate Special

Committee on Aging focused attention on CCRCs and published

recommendations for state regulations and best practices.39

39 Continuing Care Retirement Communities: Risks to Seniors,” Summary of Committee Investigation, U.S. Senate Special Committee on Aging, July 21, 2010.


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Evaluating Assisted-Living and Continuing Care Retirement Facilities

Go to these websites for evaluation guidelines and information:





www.carf.org

Justice in Aging

www.nsclc.org

Leading Age

www.leadingage.org


www.gao.gov

SKILLED NURSING FACILITIES

Skilled nursing facilities (nursing homes) provide round-the-clock medical and

personal care. It is estimated that about 20 percent of elders will experience a

nursing home stay. These facilities are staffed by registered nurses, practical

nurses, and nurses' aides. They can be freestanding or part of a CCRC.

There are two categories of nursing home residents:

Short-term residents recuperating from surgery or illness, or needing

physical therapy

Long-term residents who cannot care for themselves and need medical and

custodial care beyond the capability of an assisted-living facility

Most offer a combination of private and semiprivate rooms, and shared

bathrooms, either with roommates or between two private rooms. Unlike

assisted living, nursing homes treat patients medically. Therefore, the program

of social activities is usually minimal.

The range of quality is vast for these facilities. Anyone considering a nursing

home for a family member’s care should evaluate the facility against several

checklists, visit the facility unannounced, and ask lots of questions. It is not

uncommon for long-term residents of these facilities to be frail and suffer from

significant cognitive impairment or dementias; they are the least able to be

proactive and protect themselves. On the positive side, nursing homes in most





http://www.gao.gov/


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states must meet regulations and be open for regular inspection. They fulfill a

need, and many are operated by kind, caring, cheerful staff.

MORE CARE OPTIONS

Elder Care

Elder care is an umbrella term for the variety of services and care for those

needing assistance with ADLs. It covers a spectrum of services, from light to

intense care, at home or in assisted facilities. Elder care includes services such

as:

Meals

Socialization

Personal care

Light housekeeping in the home

Adult day care

Transportation Visiting

Telephone reassurance

Caregiver support

Respite care

Emergency response

Program of All-Inclusive Care for the Elderly

The Program of All-Inclusive Care for the Elderly (PACE) presents a model for

delivery of coordinated elder care. PACE was authorized by the federal Balanced

Budget Act (BBA) of 1997. The BBA established the PACE model of care within

the Medicare program and enabled states to provide PACE services to Medicare

and Medicaid beneficiaries. Not-for-profit organizations administer the

programs at the community level and coordinate service delivery both at home

and in assisted and nursing home facilities. PACE providers receive monthly

Medicare and Medicaid payments for each eligible enrollee.

The PACE model is based on the concept that it is better for the well-being of

elders and their families to be served in the community whenever possible. The

programs provide a range of care and services so that participants can maintain

independence and continue to live in their homes as long as possible.

PACE programs offer home-based services and coordinated care, such as home

health care, assistance with medications and injections, meals on wheels,

assistance with ADLs, housekeeping, laundry, social work, and adult day care.

Although enrollment in a PACE program requires certification for nursing home

care, very few actually reside in one. But if an enrollee does need nursing home

care, the PACE program coordinates payment for it and continues to coordinate

care.


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Shared Housing

A simple solution, shared housing involves sharing a home with a roommate, in

one’s own home or that of another. Some community organizations help with

matching up those who want to share their homes or find roommates.

Board and Care

Board and care are simple, small-scale assisted-living facilities for personal and

custodial care. Some are in converted private homes, with a few residents,

typically four to 10, and operate on an unofficial basis. These are also known as

foster care, group homes, or domiciliary homes. These facilities are suitable for

those who cannot live independently and need assistance with activities of daily

living, but do not need a nursing home environment. Long-term insurance

policies may cover the expense.

Residential Care Facilities for the Elderly

Residential care facilities for the elderly (RCFEs) provide more independence

than a nursing home. They assist with activities of daily living but not medical

care, although staff may help residents take medications. RCFEs usually charge

one basic price for a package of services, with added fees for additional services

or deductions for unused services. Residence is a landlord-tenant relationship.

Elder Cottage Housing Opportunity

The term elder cottage housing opportunity (ECHO), originating in Australia,

refers to a mobile or modular home placed on the single-family lot. When no

longer needed, the ECHO unit is moved to another location and rented to

another family. Before making arrangements for stationing an ECHO unit on a

property, area zoning regulations should be checked. Placement of ECHO units

encounters fewer obstacles in rural locations. In addition to zoning, ECHO unit

issues involve electrical, water, and waste disposal hookups and removing the

unit from the property when no longer needed.

Accessory Units

Living spaces added to a single-family home are called by different names—

granny flat, mother-in-law flat, or accessory unit—in different parts of the

country. The units can be apartments within a home, flats over a garage,

freestanding structures, or add-ons with a separate entrance. They are usually

site-built and attached to the main home, and remain functional after the elder

occupant is no longer living or has moved to a care facility.

A legal second unit usually requires a separate entrance, bathroom, bedroom,

and cooking facility. The first step in planning for an ECHO unit is to check

whether second units are legal within the jurisdiction. A zoning variance may be

required.


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A parent might use some of the proceeds from the sale of a home to pay for the

construction. A home equity loan is another method of financing the

construction. The addition of another living unit usually enhances the value of

the main home.

Senior Day Care and Senior Centers

Although not a form of housing, senior day care facilities can help elders stay in

their homes longer. These facilities fill in the gap when the caregiver must work

during the day or needs a respite. Day care centers offer supervision, usually a

noon meal, social and educational activities, and support groups. Some offer

nursing and therapy services, as well as health monitoring.

Respite Care

Respite care allows caretakers occasional time off to recoup emotionally, handle

other family responsibilities, or get away for a while. In-home respite care

workers come daily or stay in the home with the elder. An alternative is a short-

term stay in an assisted-living facility, if space is available. A short-term stay may

be possible and provides an opportunity to try out the facility without making a

commitment to move there permanently.

Memory Care Facilities

Memory care facilities specialize in care of patients with Alzheimer’s and other

types of dementia. Congregate, assisted-living, or board-and-care environments

may be appropriate for residents in early stages. However, unless the

community has a specialized unit, transfer to another facility will be required as

the disease progresses. Families who want to care for an Alzheimer’s patient at

home need to consider questions such as:

Can the environment be made secure and safe?

Are in-home respite services available, such as nurses, home health aides,

homemakers, and companions?

Can the caregiver access respite care?

Is there a senior adult day care facility available?

Are there opportunities for social interaction, mental stimulation, and

recreation for the Alzheimer’s patient?


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Regulation of Care Facilities

Various state agencies regulate different types

of facilities. Licensing and classification are

based on levels and types of service and

staffing. There are no standard definitions from

state to state, or sometimes within a state. Two

different “retirement centers” or “assisted-

living” facilities within the same state may be

licensed by different agencies and operate

under different rules and standards. There is no

federal regulation. However, federal regulations

do require that long-term care facilities provide

a 30-day written notice and discharge plan if it

is determined that a resident can no longer

remain there.

WHAT WILL MEDICARE OR MEDICAID PAY FOR?

Medicare will pay for a stay in a nursing home of up to 90 days that immediately

follows a hospital stay of more than 3 days and focuses on recovery and

rehabilitation. Medicare does not, however, pay for custodial or long-term care

in assisted-living facilities. Payment for assisted living is usually out-of-pocket,

although long-term care insurance may cover nursing home care. Medicare

does not pay for any care received outside of the United States.

Medicaid is a needs-based public assistance program with stringent eligibility

criteria and should be viewed as the payer of last resort. Medicaid payment may

be available for stays in facilities licensed as nursing homes (if the individual

qualifies for benefits) but not assisted-living and congregate facilities. The

federal government funds Medicaid but it is administered by states, which have

latitude in implementing policy guidelines.

Every state offers multiple Medicaid programs for the elderly and each program

has its own eligibility requirements. The Medicaid program has different names

in different states. Although there are many variations among states, basic

eligibility rules limit both assets and income. As a rule of thumb, liquid assets

may not exceed $2,250 ($3,000 for couples in most states) and income may not

exceed a capped amount or must be spent down on medical needs.

In most states, home equity of $572,000 or more is disqualifies an individual for Medicaid benefits. A few states set a higher home equity limit of $858,00040 and California has no limit. Fortunately, the equity in a senior’s home is exempt if a spouse or minor or disabled child resides in the home Because a home with less

40 Connecticut, Washington D.C., Hawaii, Idaho, Maine, Massachusetts, New Jersey, New Mexico, New York. Wisconsin limit is $750,000.


95

than the allowable amount of equity is a non-countable asset, a senior might be able to reduce countable assets by transferring value into the home, such as paying off outstanding home loans, buying a larger home, or paying for repairs or renovations. Payments from a reverse mortgage do not necessarily disqualify a Medicaid recipient, but any income must be spent in the month in which it is received; the remainder is considered a liquid asset. If at any time the recipient accumulates $2,000 or more in liquid assets, eligibility can be lost.

Medicaid Look Back

A person cannot immediately qualify for Medicaid by transferring or gifting

assets to someone else, such as a child,41 because there is a five-year look-back

period for eligibility. A real estate professional should make clients aware of this

look-back provision if they, or their loved ones, are selling to enter a nursing

home and expect Medicaid to cover the expense. In most states, Medicaid will

not kick in until all liquid assets are spent down.

Medicaid Estate Recovery

Federal law requires states to recover payments made to Medicaid beneficiaries

for nursing home facilities, home care, and related hospital and prescription

drug expenses. States also recover payments made to permanently

institutionalized individuals.

Medicaid recovers expenses through two types of liens:

Estate recovery lien placed on the property of the deceased

Tax Equity and Fiscal Responsibility Act (TEFRA) lien placed on the property

of a living beneficiary

When a Medicaid recipient dies, the state files a claim in probate court.

Surviving heirs are not required to use their own funds to repay the debt owed

to the state; however, if the home is subject to an estate recovery lien, the heirs

may want to use their own funds to pay the Medicaid claim and keep the home.

States are required to waive recovery of expenditures if it would result in undue

hardship or impoverishment of the spouse or heirs—for example, when a family

farm is the sole income-producing asset of the survivors.

Regulations on the use of Medicaid cost recovery vary widely from state to

state. It is important for the real estate professional to be aware of state

regulations when working with a client who anticipates selling a home before

moving into a care facility and plans to apply for Medicaid benefits. The seller or

family would also be wise to consult with an attorney specializing in elder care

issues.

41 Medicaid allows transfer of the home without asset penalty to a spouse, a dependent child who is a minor or disabled, a sibling who has been living in the home and providing care for at least one year, or a child who has been living in the home and providing care for at least two years.


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Medicaid Planners

It’s a good idea to add a Medicaid planning professional to your resource bank

of experts. Applying for Medicaid is a complex process and rules change

frequently. Most states have multiple programs with different eligibility rules.

Professional Medicaid planners help families compile documentation, complete

the application process, structure financial resources, and manage asset

transfers including protection of a family home and income for a healthy spouse

to live independently. Find a Medicaid planner in your area at

www.medicaidplanningassistance.org/find-a-medicaid-planner.


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For many age 50+ homeowners, their home represents the largest asset and the

equity in it is the chief source of net worth. Despite recent economic conditions,

many homeowners have substantial equity through mortgage pay-down and

value appreciation.

Do These Scenarios Sound Familiar?

Retirees would like to make a transition—downsize, upsize, move to a

better neighborhood or active adult community or a more accessible

home—but are waiting to get the right price so that they can pay cash for

the new home and avoid mortgage payments.

Elderly homeowners are about to lose a home to foreclosure because their

fixed income hasn’t kept up with the cost of living and mortgage payments

are unaffordable.

An elderly homeowner can’t relocate from a declining neighborhood

because the sale proceeds from the current home won’t be enough to buy

in a better area.

A family is struggling to find a way for an elderly relative to stay safely in a

long-time home, but her income isn’t enough to pay for in-home assistance.

Retirees would like to buy a second home, but they don’t want the

responsibility or financial drain of mortgage payments.

Every real estate professional specializing in the 50+ market has encountered

these or similar scenarios. The questions are:

How can home equity be used to maintain and improve quality of life,

accomplish the next transition, or just stop mortgage payments?

How can real estate professionals close more transactions and help clients

accomplish their goals?

In this chapter, we will explore reverse mortgage financing solutions. As a real

estate professional, you can help clients, customers, and families by making

them aware of the possibilities and guiding them to the finance professionals

who can make it happen. You could be a hero.


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WHAT CAN A REVERSE MORTGAGE ACCOMPLISH? A reverse mortgage converts home equity into cash. Like a forward mortgage,

the borrower’s home secures the loan. It is called a reverse mortgage because

money paid in by the homeowners over the years plus value appreciation is paid

back to the homeowners, who retain the title and continue to live in the home.

When tapping into home equity increases cash flow or enables a change in living

situation, homeowners can increase their options and enhance their quality of

life. Allaying money worries diminishes stress and contributes to a longer,

healthier, and happier life. A reverse mortgage can:

Supplement Social Security, pension income, or public assistance benefits.

Postpone drawing Social Security benefits, thus increasing the monthly

benefit.

Provide an income the borrower cannot outlive.

Stop mortgage payments.

Prevent foreclosure.

Pay for in-home care, medical expenses, and long-term care insurance.

Prepare a home for aging in place.

Pay off credit cards, debts, and existing mortgage balances.

Buy a second home or a new home.

Upsize, downsize, move to an active community, or relocate closer to

family.


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HOW DO REVERSE MORTGAGE WORK? In order to understand how a reverse mortgage works, it helps to compare it

with a conventional mortgage.

Conventional Mortgage Reverse Mortgage

Purpose Provide funds for purchase of

a property.

Provide income for a variety

of purposes.

Funds Dispersed in a lump sum for

the payment to the seller.

Dispersed in monthly

payments, lump sum, or as

needed.

Payments Borrower makes monthly

payments to the lender to pay

down the loan.

Lender makes payments to

the borrower.

Approval

Criteria

Purchase price and value of

the property, down payment,

borrower’s income,

creditworthiness, financial

assets, and other debt

obligations.

Value of property, the

borrower’s equity, age, and

ability to maintain the

property.

Lender’s

ROI

Repayment of the loan along

with interest.

Proceeds from the eventual

sale of the property.

Loan

Balance

Decreases with each

payment.

Increases with each

payment.

Borrower’s

Equity

Increases with each

payment.

Decreases with each

payment.

Negative Amortization

Reverse mortgages amortize negatively. The payments the borrower receives

add to the balance owed at the end of the loan and interest accrues at a fixed or

adjustable rate. But the borrower will never owe more than the property is

worth, nor can the lender seek access to other assets.


The lender places a lien on the property, but as long as the borrower lives in and

maintains the home, there is never any repayment obligation. Events that

trigger repayment include a move to another home as principal residence or

permanent absence (12 months or more), a specified maturity date, death of

the last surviving homeowner, sale of the property, and failure to pay taxes and

insurance or make repairs. The borrower may pay off the loan through the sale

of the property or prepayment at any time without penalty.


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FHA Leading Provider

FHA insures about 90 percent of reverse mortgages through its Home Equity

Conversion Mortgage (HECM) program42. It sets standards and policies for the

loans, collects data on trends, and monitors lenders. There are some lenders

that offer non-FHA insured reverse mortgages with higher payouts.

FIGURE 7.1: REVERSE MORTGAGE TRENDS

*Annual totals are compiled at the end of the fiscal year.

Source: HUD statistics, National Reverse Mortgage

Lenders Association, www.nrmlaonline.org

TYPES OF HECMS

HECM for Refinance

The technical term for the HECM. The mortgage enhances quality of life by

increasing cash flow. Payout can be monthly, as needed, lump sum, or a

combination of methods.

HECM for Purchase

The HECM for purchase provides a lump sum for the purchase of a home.

Buyers usually need to make a substantial down payment.

42 Because FHA insures the majority of reverse mortgages, lenders may use the terms HECM and reverse mortgage interchangeably.

42

,28

4 55

,33

2

48

,90

2

58

,04

3

51

,64

2

60

,09

1

54

,82

2 73

,13

1

79

,10

6

11

4,6

92

11

2,1

54

10

7,5

58

76

,35

1

43

,13

1

20

18

20

17

20

16

20

15

20

14

20

13

20

12

20

11

20

10

20

09

20

08

20

07

20

06

20

05

HECM applications peaked in 2009 at

more than 100,000 mortgages.

http://www.nrmlaonline.org/


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HECM Line of Credit

A reverse mortgage line of credit allows the borrower to draw funds as

needed from the equity in the home. The line of credit maintains a growth

rate that allows the borrower to tap into more equity without needing to

refinance; the amount gained through the growth rate is nontaxable

income. If there is a mortgage balance on a property, however, the

remaining mortgage balance must be paid off before the reverse mortgage

takes effect.

Fixed or Adjustable Rate?

The HECM borrower may choose a fixed or adjustable-rate loan. The cost of the

mortgage and availability of funds for a line of credit should be compared to a

lump sum with a fixed rate to determine which will be most cost effective for

achieving a specific goal. HECM counselors can provide printouts, called total

annual loan costs (TALCs), showing annual and total costs and payouts for all

options.

As a loan product, the fixed-rate HECM offers a predictable interest rate. HECMs

for purchase (H4P) are fixed loans that require the borrower to take all funds at

closing. H4P loans are usually fixed rate but can be adjustable rate, as well;

some borrowers may have the finances to take this option and obtain a line of

credit for their new home. Depending on state and program guidelines, a lump

sum payout could disqualify the borrower for public benefits, such as Medicaid.

It is always recommended that the borrower consult a professional such as a

financial advisor, CPA, or elder law attorney before selecting this option.

The interest rate of an adjustable-rate HECM will determine whether the total

loan amount will offer more, the same, or less than a fixed-rate loan. Keep in

mind that with adjustable-rate HECMs, the interest rate can increase. The rate

cap limit increases annually, as well as over the life of the loan. HECM

adjustable-rate loans can have various payout options, such as a lump sum,

monthly or annual withdrawal, or a combination of these.

HECM ELIGIBILITY Borrower eligibility criteria:


Own the property outright or have paid down a considerable amount.




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Have financial resources—residual income—to continue to make timely

payment of ongoing property charges such as property taxes, insurance and

HOA fees, and so on.

Participate in a counseling session with a HUD-certified HECM counselor.

Eligible properties:

Single-family homes


Manufactured homes built after 1976 and installed on a permanent

foundation

Two to four-unit homes with one owner-occupied unit

COUNSELING—THE IMPORTANT FIRST STEP Counseling is the first step in the HECM application process. Don’t

underestimate the importance of the counseling session. It must be completed

before going forward with the application process. The certificate provided by

the counselor becomes part of the application file. The session can take place

over the phone, in the counselor’s office, or the home. Anyone who will be

involved in the decision making, such as other family members or an attorney,

can participate in the counseling session. The lender, however, cannot schedule

or participate in the counseling session.

The counselor is responsible for:

Helping the client understand the appropriateness of a reverse mortgage to

meet the needs as well as alternatives.

Explaining the features of the reverse mortgage and its impact on the client

and heirs.

Discussing financial and other needs for remaining in the home, if that is the

client’s goal.

Confirming the client’s comprehension of the reverse mortgage by asking

specific questions.

Counselors may charge a fee, up to $125, but they must inform the client in

advance. Some nonprofit agencies provide the counseling at a reduced rate or

no charge, based on the ability to pay; they cannot refuse because of inability to

pay. The fee can be paid out of pocket or out of the loan proceeds.


105

Six-Step Counseling Process

HUD requires HECM counselors to follow a specific protocol when conducting

the counseling session, send a required information packet before the session,

and follow up to confirm understanding.

1. Schedule an appointment. It’s okay to shop around for a counselor; some are booked 2–3 weeks in advance but others may have immediate availability.

2. Counselor contacts the client and sends an information packet. The client can ask for sample loan printouts to review in advance.

3. Counselor collects information from the client.

4. Counseling session. It’s a good idea to prepare a list of questions to ask during the session. Counselors must discuss other options such as refinancing an existing mortgage or moving to an assisted-living residence.

5. Certificate of HECM Counseling. When the counseling session is complete, the counselor provides a certificate attesting to completion of the counseling session. This certificate becomes part of the application file.

6. Follow-up.

Find HUD certified counselors at

https://entp.hud.gov/idapp/html/hecm_agency_look.cfm.



106


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HECM APPLICATION PROCESS Except for counseling, the application steps are similar to a forward mortgage. A

title search, appraisal, and inspections are ordered at the time of application.

For a refinance, defects in the home must be repaired and can be paid for with

loan proceeds; for a purchase, the seller must make the repairs.

The underwriter reviews the documentation and confirms that all conditions

relating to additional or missing items are satisfied prior to closing. Once all

conditions are met, the closing date can be set. The total length of time for the

application process will vary by lender and depends on the conditions of the

approval as well as how long the borrower takes to satisfy the conditions.


HECM borrowers must complete a financial assessment. In the past, HECM

qualification focused on the condition of the property and the life expectancy of

the borrowers. Under current rules, borrowers must demonstrate the financial

capacity and willingness to make the payments required for property taxes,

property and flood insurance, and mandatory property obligations, as well as

maintain the property in good repair.

The financial assessment includes evaluation of credit history including:

Cash flow residual income to pay obligations and living expenses.

Credit, income, assets, and property charges.

History of timely payments and maintenance of property insurance and

property taxes. (HOA fees, if applicable).

Extenuating circumstances and compensating factors, such as the potential

positive impact of the HECM on the borrower’s financial capacity.

Note: A Non-Borrowing Spouse (NBS) is not considered unless he or she is a

co-signor on the account. The debts of the NBS will be included in the

residual income test for the borrower in community property states.

The borrower does not have to meet qualifying ratios for loan-to-value and

debt-to-income as for a regular (forward) mortgage.

Required Set-Asides

If the financial assessment raises doubts about the borrower’s ability to comply

with mortgage terms, the lender may set aside funds to pay property taxes,

insurances, mandatory property obligations, and repairs identified during the

appraisal. The funds may be withheld from a lump sum payment as a life-


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expectancy set-aside, based on the youngest borrower’s age, or withheld from

monthly payouts.

If the life-expectancy set aside is exhausted, the borrower must continue to pay

obligations from whatever funds are available. Even if it is not required, a

borrower may voluntarily establish a set-aside fund so that the lender can pay

property charges from a line of credit or monthly withholding.

PRINCIPAL LIMITS AND COSTS Calculation of the amount of principal available is basically a function of the life

expectancy of the borrowers, home equity, and property value. The due-and-

payable clause of HECM loans can be deferred for a non-borrowing spouse who

wants to remain in the home. Consequently, the principle available is

determined by the age of the youngest spouse regardless of whether they are a

mortgagor of record or not.

Payout Limits

Lump-sum payouts are capped at the greater of 60 percent of the principal limit

or the sum of monthly property obligations plus 10 percent of the principal

limit. Monthly payouts (term, tenure, and modified term and tenure) and line-

of-credit disbursements during the first 12 months cannot exceed the greater of

60 percent of the principal limit or the sum of monthly property obligations,

plus 10 percent of the principal limit.

Mortgage Insurance Premiums

The initial premium is 2 percent and the annual premium equals 0.5 percent of

the outstanding mortgage balance. The mortgage insurance premium may be

financed as part of the loan.

Other Fees and Costs

The origination fee, which compensates the lender for processing the loan, is

the greater of $2,500 or 2 percent of the maximum claim amount (MCA) for

properties valued at up to $200,000, plus an additional 1 percent for properties

valued at more than $200,000. For example, if the MCA is $300,000, the

origination fee would be $5,000; 2 percent of the first $200,000 plus 1 percent

of $100,000. The maximum origination fee is $6,000.

Closing costs from third parties can include an appraisal, title search and

insurance, surveys, inspections, recording fees, mortgage taxes, credit checks

and other fees.


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Lenders may charge a monthly servicing fee of no more than $30–$35 deducted

from available funds and added to the loan balance. Lenders have the option to

include the servicing fee in the mortgage interest rate.

Total Annual Loan Cost

The total annual loan cost (TALC) statement shows the complete loan cost over

a period of time. Unlike an annual percentage rate (APR) disclosure, the TALC

factors in time and value appreciation. The longer a borrower lives and the

lower the appreciation rate, the more likely the balance will surpass the value of

the home, which results in a bargain for the borrower. However, if appreciation

is high and the borrower lives in the residence for a short time the true cost of

the loan can be high.

A homeowner can ask the HECM counselor or lender for TALC rate comparisons

for various stages of the loan, rates, and loan types. This request should precede

the loan application. The comparison page, TALC, and amortization schedule are

supplied again at application. Two limitations on the usefulness of a TALC are

that it does not take into consideration the added value in a growing line of

credit and calculations are based on the life expectancy of one homeowner.


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HECM FACT SHEET

Eligible Borrowers Eligible Properties


Own the property outright or have paid down

a considerable amount.



Have financial resources to continue to make

timely payment of ongoing property charges

such as property taxes, insurance and HOA

fees, and so on.

Participate in a consumer information session

given by a HUD-approved HECM counselor.

Single-family homes


Manufactured homes built after 1976 and

installed on a permanent foundation

Two- to four-unit homes with one owner-

occupied unit


Complete counseling

Complete a financial assessment

Maintain the home in good repair

Buy homeowner’s insurance

Pay property taxes and mandatory obligations

(may be set aside and paid by the lender)

Payout Limits Four factors determine amount available:

Age of youngest borrower or nonborrower

spouse

Appraised value or sales price

Interest rates

Maximum claim amount

Pay out Limit: the greater of

60% of principal limit

Sum of monthly property obligations plus 10%


Credit history

Cash flow residual income

Credit, income, assets, property charges

History of timely payments and maintenance

of property insurance

Extenuating circumstances and compensating

factors

Payout Options All require at least one borrower to occupy the home as a principal residence.

Tenure Equal monthly payments as long as one borrower is living

Term Equal monthly payments for a fixed number of months

Line of Credit Unscheduled payments as needed until the line of credit is exhausted

Modified Tenure Combination of line of credit and scheduled payments

Modified Term Combination of line of credit and monthly payments for a fixed number of

months

Single payout Lump-sum disbursement at closing


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Set-Aside Options (required or voluntary)

Life-expectancy set-aside, withheld from lump-sum payout

Monthly withholding from tenure or term payments, or line of credit

Lender may set aside funds to pay property taxes, property insurance premiums, mandatory property

charges, and repairs identified during appraisal

Interest Rates

Fixed Rate: same interest rate for the life of the loan

Adjustable Rate: interest rate adjusts annually or monthly; maximum 2% annual adjustment and 5%

over life of loan; no cap on monthly adjustable rate. Rate based on T-Bill or LIBOR rate, plus lender’s

margin.

Upfront Costs

Counseling $125 HUD recommended fee, some services offer free counseling

Origination Fee $2,500 minimum, $6,000 maximum

Greater of $2,500 or 2% of MCA up $200,000

Plus 1% of MCA over $200,000

Mortgage Insurance 2% initial premium

.05 annual premium

Closing Costs Usual costs associated with obtaining a mortgage, such as appraisal, title

search, inspections, recording fees, and state and municipal fees; can be

financed as part of loan.

Monthly Fees Service Fee $30–$35 (some lenders waive the fee)

Taxes Real estate taxes may be set aside and paid by lender.

When Does the Loan End? Move/Absence The borrowers move to another residence, or the last borrower no longer lives

in the home as a primary residence for a period of 12 consecutive months.

Short-term stays in a hospital or second home do not disqualify the property.

Sale The property is sold.

Death The last borrower or nonborrower spouse residing in the home passes away.

Neglect The homeowner does not pay real estate taxes or insurance or keep the

property in good repair.


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REVERSE MORTGAGE ALTERNATIVES

A reverse mortgage should be compared to selling the home and using the

proceeds to rent or buy a new home, refinancing, or a home equity line of credit.

Factors to consider when comparing a sale with a reverse mortgage include:

Quality of life

Net sale proceeds

Cost to buy or rent a new home or reside in a congregate or assisted-living

community

Availability of alternative income-producing investments, potential earnings,

and ability to manage the investments

Availability of community-based support services and public benefits

REVERSE MORTGAGE BENEFITS

Tapping built-up equity

The main benefit of a reverse mortgage is allowing a homeowner to tap the

built-up equity in the home by receiving immediate cash, lifetime payments,

or a line of credit.

Lifetime income

Tenure payments provide a monthly income that will continue even if the

homeowner outlives the actuarial life-expectancy tables. Homeowners can

live in the comfort and privacy of their own homes and with the security of

stable income.

Nonrecourse financing

Neither the homeowner nor the heirs will ever owe more than the home is

worth, even if the home value declines or payouts exceed the value. The

lender cannot seek other assets to make up for a shortfall. If the homeowner

or heirs sell the property and the proceeds fall short, the remaining mortgage

balance is excused. Mortgage insurance compensates the lender for a

shortfall.

Tax-free payouts

Money borrowed through a reverse mortgage is not taxable income. Any

interest expense accrued by the borrower on a reverse mortgage is not

deductible until the interest is actually paid, which is usually when the

mortgage is paid off.

Asset preservation

It may be better to tap home equity than to spend down other assets.


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WHEN IS A REVERSE MORTGAGE NOT A GOOD IDEA?

High-risk, low-return investments

A reverse mortgage is discouraged when the proceeds are intended for a

high-risk investment or one with a lower rate of return than that paid on the

line of credit. The investment rate of return should exceed the growth rate

on the line of credit.

Annuity purchase

Using the loan proceeds to purchase an annuity is generally not allowed.

Low equity or property value

When a homeowner does not have much equity in the property—less than

40 percent—or the property value is low, the amount available through a

HECM will likely be insufficient to offset the costs. However, even under

these circumstances a HECM may be the best course of action if the payout

meets financial needs.

Short-term, small financial needs, no compelling need

HECM costs outweigh the benefits if the borrower’s needs are short term or

modest. It is usually not the best choice for someone who will likely need

nursing home care in the near future. Obviously, the HECM is not meant for

flipping properties. As we have seen, the costs associated with reverse

mortgages are high. Lacking a compelling need to draw out the equity, the

homeowner should probably not consider a HECM as an option.

Paying for nursing home care, buying into a continuing care community,

buying new homes not ready for occupancy

Because of the residency requirement, a reverse mortgage cannot be used

to buy into a CCRC or pay for a nursing home stay of more than 12 months,

unless, for example, one spouse continues to live in the home. Payout from

a reverse mortgage could, however, be used to pay for long-term care

insurance, which would cover a future nursing home stay. Newly

constructed homes are eligible if occupied within 60 days.

Mortgage default

If the borrower is in mortgage default the HECM can, potentially, be used to

save the home. In order for this option to be available to the borrower, the

other outstanding FHA loan must be paid off through the HECM.


114

WHO OWNS THE PROPERTY? The first step in qualifying for a reverse mortgage involves a look at who owns

the property—the names on the title. Remember that qualifying for a reverse

mortgage requires the youngest borrower to be at least 62 years old. Note that

a child or grandchild whose name has been added to the title can disqualify the

borrower.

WHAT HAPPENS TO THE NON-BORROWING SPOUSE IF THE BORROWER DIES? If the borrower passes away and the HECM was issued on or after August 4,

2014, the eligible non-borrowing spouse (NBS) may remain in the home. The

loan repayment is deferred if the following conditions are met:

At the time of the loan closing, the NBS is married to the borrower and

remains married for the rest of the borrower's lifetime or until the loan is

satisfied.

The spousal status of the borrower and NBS is disclosed at the time of the

loan application and closing.

The NBS is specifically named as such in the mortgage documents.

The property is the NBS's principal residence.

The NBS establishes legal ownership (or other ongoing legal right) to remain

in the property within 90 days of the death of the borrower.

The NBS continues to meet all loan obligations.

WHAT DO HEIRS RECEIVE? When the last surviving homeowner passes away, the remaining equity in the

property goes to the heirs, not the bank. Heirs have a choice to sell (must be an

arm’s-length sale) the house to pay off the debt, pay off the debt from another

source, or obtain a new forward mortgage on the home. Obviously, the heirs

must meet mortgage underwriting criteria for a forward mortgage. If the

property is sold by heirs, the sale price must be at least at least 95 percent of

the appraised value.

If the amount owed is more than market value, the heirs or the owner may let

the house go to the lender through transfer or foreclosure. Because a reverse

mortgage is a nonrecourse loan neither the heirs nor the estate must satisfy the

overage. That will be met through the mortgage insurance.


115

If there are no heirs, the bank may take possession of the home and sell it. The

estate may retain ownership of the property, but it must pay off the loan.

Spending down the equity in the home, however, reduces the value for estate

tax purposes.

MORE FAQS ABOUT REVERSE MORTGAGES Why are insurance premiums so high for a reverse mortgage?

With a reverse mortgage, the lender assumes all the risk. The insurance

guarantees that the borrower will receive the expected payouts by offsetting

the risk that the borrower will outlive the equity in the home. It also protects

the lender from a shortfall in the sale proceeds or a new forward mortgage

because of value decline. If the sale proceeds fall short of the loan balance, the

insurance guarantees that the homeowner, the estate, and the heirs will not

owe more than the value of the home. Like any other FHA-insured loan, the sale

must be arm’s-length and the property cannot be sold to a relative in order to

excuse the remaining balance.

What if a buyer needs more cash to complete the transaction?

Others can provide the cash to complete the transaction, but it must be

available at least 60 days in advance. The borrower must present proof of

the availability and source of the funds such as a letter of deposit, proof of

liquidation of other assets, deed of sale, or a closing disclosure.

What if there is a mortgage balance on the home?

A reverse mortgage requires the property to be owned debt free. The

potential borrower is not permitted to have a mortgage payment and a

reverse mortgage.

Is a reverse mortgage an alternative to a short sale?

Yes and no. FHA guidelines set lending limits as the lesser of the sales price,

appraised value, or the FHA limit. If the home value has dropped, thus

reducing equity, the lender still must be willing to compromise and reduce

the mortgage balance. Assuming an adequate amount of equity remains,

the mortgage balance can be paid off with a reverse mortgage.

Depending on the HECM lender, they may be able to negotiate on behalf of

the borrower. For example, the nation’s top reverse mortgage lender,

American Advisors Group (AAG), has a short-sale payoff department that

negotiates payoff amounts.

Can a reverse mortgage stop a foreclosure?

Yes, but action must be quick. If the homeowner meets other qualifications,

a reverse mortgage can stop monthly mortgage payments and prevent a

foreclosure.


116

How is a reverse mortgage line of credit different from a regular home

equity loan? The borrower pays interest only on the amount withdrawn and the

remaining line of credit grows at the same rate as withdrawals so that the amount of available credit increases.

The HECM line of credit does not require repayment until the borrower sells, vacates the home, or passes away.

The amount available cannot be frozen.

A negative-equity situation cannot occur. The borrower, or heirs, will never owe more than the property is worth.

What is the impact on Social Security, SSI, Medicare, and Medicaid?

Payout from a reverse mortgage doesn’t impact Social Security or Medicare

benefits. But a recipient of a need-based program, like Medicaid and

Supplemental Security Income (SSI), must be careful that the payout does

not exceed liquid-asset limits Reverse mortgage payouts can impact

Medicaid eligibility even though home equity is not a countable asset. An

estate recovery or TEFRA lien placed on a reverse-mortgaged property will

prevent an heir from selling the home without first reimbursing Medicaid.

Clients should be advised to consult with the local public benefits office or

attorney for information and clarification before taking any action. You, as a

real estate professional, should never be in the position to have to provide

this advice to your client.


117

SCENARIOS

It’s Time to Move—How a Reverse Mortgage Made It Happen

Lois McGrady, age 80, is in fairly good health except for

her eyesight which has become progressively weaker

over the last couple of years. Since her husband passed

away she is increasingly confined to her home. Lois still

lives in the bungalow home she and her husband

bought when their daughter, now the mother of

teenagers, was a toddler. The neighborhood isn’t as

safe as it used to be, and Lois would like to move into a

seniors-only condo development close to her

daughter’s home. Lois accepted an offer of $174,000

for her bungalow, but condos in the senior

development start at $215,000. The sale proceeds won’t be enough to afford

the higher-priced condo. From the bungalow home sale proceeds, Lois makes a

required down payment of $85,000 and pays reverse mortgage closing costs of

$2,750. The reverse mortgage provides $130,000 to complete the purchase of

the condo. After the transaction, she has a nest egg of $86,250 to cover the

monthly condo assessment and other expenses.


118

Buying a Second Home

Dorothy and Brad Lennell are active retirees.

Dorothy just celebrated her 65th birthday and

retirement. Brad, age 70, retired three years ago.

Now that Dorothy has retired they are looking

forward to spending winters in a warmer climate.

With many of their friends purchasing properties

in Florida, they want to take advantage of the

opportunity to buy a second home close to their

friends, but still have room for their children and

grandchildren to come for visits. Brad nurtures a

dream of traveling around the country in an RV

while they are both in good health. They both

have good pensions and income from 401(k) plans but would rather use the

equity in their current home, valued at $532,000 with no mortgage, instead of

dipping into their savings. Based on Dorothy’s age, they qualify for an

adjustable-rate reverse mortgage line of credit of $285,950. In the first year,

they use $190,000 toward purchase of a three-bedroom condo in Fort Myers,

Florida. The remaining $95,950 line of credit is available for future expenses and

maybe for leasing an RV.


119

Stopping Mortgage Payments, Preventing Foreclosure

Henry Liang’s children finally convinced him to retire

at age 70. Henry and May, his wife, purchased their

current ranch-style home 15 years ago. May, who

passed away a year ago, was in the early stages of

multiple sclerosis when they purchased the home,

and they needed a one-level home. Henry’s delayed

retirement increased his Social Security benefit, but

the printing company where he worked for 30 years

is going bankrupt and the pension he counted on

may be lost or greatly reduced. He still owes

$125,000 on the mortgage on his home, and the

monthly payment is $1,594; the appraised value is

$358,000. Henry wants to continue living in his home, but if his pension is lost it

will be a real stretch to continue the mortgage payments. His children are

dealing with job layoffs too, and his daughter recently asked if she and her

husband could move in. Henry qualifies for an adjustable-rate reverse mortgage

that will pay off the mortgage balance on his home and provide a first-year

$21,000 line of credit and $58,500 after the first year. Henry will be free of the

burden of future mortgage payments. He can also afford the estimated cost of

$10,000 to enclose a porch in order to increase the amount of living space.


120

Buying a New Home

Ruth Sorenson and Lillian Adams have

been co-owners of a successful art

gallery and life partners for more than

20 years. At ages 64 and 68, they are

ready to move out of the city and retire

from high-stress business ownership.

While operating their business, they

lived in a rented loft apartment above

the gallery. In their retirement years,

they want the privacy and security of

owning a home. Ruth and Lillian plan to relocate to a nearby small town with a

budding artists’ colony and open a weekends-only gallery. The sale of their

business netted $165,000. They found the perfect home priced at $181,000 and

in good repair, but in need of updating. Based on their ages and the value of the

home, they qualified for a fixed-rate reverse mortgage of $95,358 after closing

costs. After making the required down payment of $85,642 from the sale

proceeds of their business, they have $79,358 remaining to pay for updating the

kitchen and bathroom and starting a new business. They own their first home

and have no mortgage payments.


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Supplementing Income

Virginia Dwyer, age 79 and widowed, was always on

the go before rheumatoid arthritis affected her

mobility and ability to drive. She would like to stay

in her home but has trouble keeping house and

preparing meals. Her two sons live nearby but have

young families and demanding careers; they can’t

provide day-to-day assistance. Virginia values her

independence and the serenity of her home. If she

moved into either son’s home, she would be living

under the same roof with teenagers. Homemaker

assistance for a couple of hours a day—for meals,

grocery shopping, errands, light housekeeping, and

trips to the doctor—would provide enough support for her to remain safely at

home, but it will cost almost $1,200 a month. Virginia’s income decreased when

her husband passed away and now, with the expense of costly medications for

her arthritis, it will be difficult to afford the help she needs to stay in her home.

Her home is valued at $510,000, which qualifies her for an adjustable-rate

reverse mortgage line of credit up to $300,472. She can withdraw up to

$172,480 in the first year. Virginia can draw on the equity in her home to pay for

homemaker assistance and prescription medicines as well as other expenses.


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FAMILY ISSUES

The circumstances, needs, wishes, and quality of life of the elder family member

should be the decisive factors in obtaining a reverse mortgage. When family

members and heirs can be part of the decision-making process, they have an

opportunity to work through the practical and emotional issues and participate

in making the best choice for the family dynamic. Although heirs are not

responsible for the debt accrued on the home, they do need to understand fully

the mechanics of the reverse mortgage and their options when the loan comes

due. Although they receive the remaining equity, if any, heirs must pay off the

loan with other assets, sell, or refinance with a new forward mortgage. If heirs

want to keep the property but can’t pay off a loan or qualify for a mortgage,

they may feel unfairly deprived of an expected inheritance.

Family members can, and should, participate in the counseling session. The

HECM counselor is required to document the names and relationships of

everyone participating in the counseling session. A person holding a durable

power of attorney, a life trust, or appointed conservator is eligible to obtain the

loan on behalf of the homeowner; proof of these authorizations must be

provided to the counselor.

Almost every real estate professional has encountered a situation in which adult

children have ulterior motives, but most family members have their elderly

relatives’ best interests at heart; they want them to live comfortably in a safe,

suitable home and enjoy a good quality of life. Real estate professionals should

never try to take the place of a lender or HECM counselor, but they can make

families aware of reverse mortgage possibilities and help them work through

the issues to see what is best for the relative and the family.

OPPORTUNITIES FOR THE REAL ESTATE PROFESSIONAL Reverse mortgages create transactions when clients use the mortgage to

purchase property. And there is the potential for two transactions when clients

sell a home and buy another using the reverse mortgage for the purchase.

As the preceding scenarios demonstrate, the reverse mortgage opens

possibilities for homeowners who cannot make a move because of low income.

For homeowners whose homes lost value in recent years, the reverse mortgage

may help them realize, and accept, that home values may never return to hot-

market prices but that there are viable options. Homeowners waiting to get the

right price may be motivated to go ahead with planned moves if they do not

have to rely on sale proceeds.

Real estate professionals should involve all concerned

family members in discussions regarding reverse


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mortgages. Always be cognizant of the needs of the homeowner and act in the

manner that best serves them. Take time to explain to the homeowner, as well

as involved family members, how a reverse mortgage may be in their best

interest. If mishandled, however, suggesting a reverse mortgage may create

false expectations and cause hard feelings between you, the homeowner, and

other family members. Remember, for many members of the mature

generations, the home is an anchor that should never be risked. For baby

boomers, on the other hand, the home may be viewed as a financial asset and

source of funding for lifestyle choices as well as supplementing retirement

income.

SELLING OR BUYING A REVERSE MORTGAGED HOME What are your responsibilities as a listing agent if you determine that the seller

has taken a reverse mortgage on the home? As the listing agent, you should ask

to see the most recent mortgage statement from the seller or their heirs to

learn the approximate payoff amount. With reverse mortgages, there are two

liens on the property for more than it is worth. One lien is from the lending

institution that holds the reverse mortgage and the other lien from HUD since it

is a government-insured loan. If there is still equity in the house, the owner or

heirs may want to sell it and pay off the mortgage and keep whatever equity

they are due after the sale of the house. The sales price must be at least 95

percent of the appraised value.

As a buyer's agent, if you see two high liens and one of them is HUD, ask the

listing agent if they have confirmed the balance owed. You want to be sure the

balance owed doesn't exceed the value and that the house can be sold to your

buyer client.


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In this chapter, we’ll look at some tax issues of particular concern for age 50+

homeowners and retirees. Real estate professionals don’t need to memorize all

the details of the following tax issues, but they should be aware of the concepts

and ramifications for real property ownership and transfer. When issues and

concerns arise, the real estate professional should advise clients to seek the

advice of appropriate experts.

DECLARING A PRINCIPAL RESIDENCE Tax considerations can impact retirees’ choices of where to live. A state that has

low or no personal income tax or sales tax or low real estate tax rates provides

an advantage for retirees living on fixed incomes. For those who maintain a

home in more than one state, the issue of declaring a primary residence can

significantly impact income and real estate tax as well as even how property is

divided among heirs. For example, many states provide a homestead exemption

that offers some tax relief for seniors who are residents of the state.

Note: The IRS states that a taxpayer can have only one primary residence at a time.

How can homeowners with residences in more than one state prove which

residence is their principal residence? Proofs of residency include:

An affidavit declaring residency

Voter registration

Documented length of time spent in the residence

A bank account

Church or temple membership

Driver’s license

Utility bills

Mailing address on a tax return

Reference to the domicile/principal residence in a will

Real estate professionals should know about available tax breaks, such as exemptions or postponement of tax payments for retirees and older homeowners. For example, some states offer a property tax deferral or freeze so that elderly homeowners are not taxed out of their homes; the state may recover deferred taxes through a property lien due on sale or death of the homeowner or surviving spouse.


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Mortgage Interest Deduction43

‘The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018

until 2026 the deduction for interest paid on home equity loans and lines of

credit, unless they are used to buy, build or substantially improve the

taxpayer’s home that secures the loan.

Under the new law, for example, interest on a home equity loan used to build

an addition to an existing home is typically deductible, while interest on the

same loan used to pay personal living expenses, such as credit card debts, is

not. As under prior law, the loan must be secured by the taxpayer’s main

home or second home (known as a qualified residence), not exceed the cost

of the home and meet other requirements.

For anyone considering taking out a mortgage, the new law imposes a lower

dollar limit on mortgages qualifying for the home mortgage interest

deduction. Beginning in 2018, taxpayers may only deduct interest on

$750,000 of qualified residence loans. The limit is $375,000 for a married

taxpayer filing a separate return. These are down from the prior limits of $1

million, or $500,000 for a married taxpayer filing a separate return. The limits

apply to the combined amount of loans used to buy, build or substantially

improve the taxpayer’s main home and second home.

UNDERSTANDING CAPITAL GAINS TAX Capital gains tax is an important consideration for all real estate owners—

homeowners, investors, and second-home owners. In real estate, a capital gain

is the difference between the adjusted basis (usually the amount paid for the

property plus improvements and transaction costs) and the current sales price.

Adjusted basis is the starting point for determining gain or loss. The basis of a

property may be its purchase price, fair market value at a specified date, or a

substitute basis. Capital improvements and transaction costs increase basis;

depreciation (on investment and income property) reduces it. The lower the

adjusted basis, the higher the gain, and, conversely, the higher the basis, the

smaller the tax implications. To reduce or minimize the capital gains tax

purposes, a high adjusted basis is best.

Depreciation, or cost recovery, allows a yearly tax deduction of a portion of the

value of the property but reduces the owner’s adjusted basis in the property.

When a depreciated property is sold or exchanged, the cost recovery

deductions taken over the years are recovered, or recaptured, and may be

taxed as a capital gain at a tax rate of up to 25 percent. Property that may be

43 IRS, IR-2018-32, Feb. 21, 2018, www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law.


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depreciated is sometimes called 1250 property, referring to the specific section

of the IRS code. Buildings, structures, and improvements are depreciable; land is

not depreciable.

Long-term capital gains are value increases on assets owned for more than a

year; varying tax rates apply based on the owner’s tax bracket. Gains on

property owned for less than a year are taxed as ordinary income. Losses on the

sale of an investment property (not a primary residence) are generally fully

deductible and offset ordinary income.

Basis Step-Up for Heirs

Basis step-up is an important concept for transfer of property to heirs. The

estate is subject to tax based generally on the fair market value of the assets at

the time of death, not the deceased’s basis. But heirs receive the estate assets

with a stepped-up basis of fair market value at the date of the decedent’s death.

This means that if an heir sells an asset received from the estate before the

asset further appreciates in value, there is no capital gain tax due on the sale.

The stepped-up basis rule applies to real property included in the decedent’s

gross estate. In community property states, surviving spouses benefit from a

stepped-up basis for both the inherited and their own shares of community

property.

To prevent using this rule to circumvent the tax law by temporarily gifting the

property to someone who is very ill or elderly and having that person will it

back, the stepped-up basis rule does not apply to property acquired by the

decedent by gift within one year of the date of death when the heir is the

original donor or donor’s spouse. The decedent’s basis in the property carries

over to the heir.

CAPITAL GAINS TAX ON SALE OF PRINCIPAL RESIDENCES All real estate professionals should know the current rules regarding treatment

of capital gains on the sale or exchange of a principal residence. Despite a

generous tax exemption on the gain on the sale of a principal residence, capital

gains tax can be an issue. The basics are:

A capital gain of up to $250,000 single (S) or $500,000 married filing jointly

(MFJ) is exempt from tax if the property has been owned and used by the

taxpayer as a principal residence for at least two years out of the five years

prior to the sale.

The exemption does not require a minimum age or rollover to a higher-

valued property. It can be claimed repeatedly as long as residency

requirements are met.


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A widowed homeowner can claim the full $500,000 (MFJ) exemption if the

sale occurs within two years of the death of the spouse and the surviving

spouse has not remarried.

Military and Foreign Service personnel on qualified active duty assignments

are allowed to suspend the five-year test period for up to 10 years.

If the homeowner must sell due to an illness or disability (their own or that

of a family member for whose care they are responsible), job relocation, or

specified unforeseen circumstances.44 a prorated portion of the gain is

excluded. For example, if a homeowner lived in a house as a principal

residence for one year before becoming disabled and forced to sell the

home in order to relocate to a care facility, the exemption would be

reduced by half; $125,000 for (S), $250,000 for (MFJ) of capital gain would

be exempt. A physician must certify the need for medical care.

Capital losses on the sale of a principal residence are not deductible.

A principal residence is not depreciable for tax purposes, unless a home

office is used.

CAPITAL GAINS TAX ON SALE OF CONVERTED SECOND HOMES After January 1, 2009, sales of properties used as second homes will always be a

taxable event. Before January 1, 2009, a second-home owner could convert the

property to a principal residence by living in it for two years and thus exclude

$250,000 (S) or $500,000 (MFJ) of taxable gain upon sale. A provision of the

2008 Housing and Economic Recovery Act made the sale of a principal residence

used as a second home (nonqualified use) for any time after January 1, 2009,

subject to capital gain tax regardless of how long the owner lives in the home. In

order to calculate the amount of taxable gain, it is important to understand the

concept of nonqualified use: It is any period of time the homeowner, spouse, or

former spouse did not use the residence as the principal residence.

Exceptions

Any time the residence was used or owned before January 1, 2009 does not

figure in the calculation. In other words, long-time owned second homes are

not as adversely impacted.

Any portion of the five-year period after the property is used as a principal

residence is not included. This alleviates a tax burden on homeowners who

44 Unforeseen circumstances include natural disasters, terrorism, job layoff, death, death of a spouse, divorce, separation, and multiple births.


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move to a new home and have difficulty selling the previous principal

residence due to a slow market.

A temporary absence, up to two years, due to changes in employment,

health, or specified unforeseen circumstances.

Example

Cliff and Shirley Anderson purchased a vacation home in 1999 for $95,000 and

sold it in 2014 for $250,000. Although they used the vacation home as a

principal residence for the 2 years prior to the sale, a portion of the gain will be

taxable. Why?

The Andersons occasionally used the vacation home for 3 years (nonqualified

use) after January 01, 2009. In 2012, they sold their principal residence and

moved into their vacation home. The Andersons lived in their former vacation

home as a principal residence for two years before selling it in 2014 for

$250,000. Because 3 out of 5 years were nonqualified use, 60 percent of the

gain, $93,000, is taxable.

The Andersons owned the vacation home for 5 years after January 1, 2009

and sold it in 2014. Years of ownership before 2009 do not count.

During the 5-year period, they used the home for 3 years as a vacation

home (nonqualified use).

The taxable portion of the gain is calculated by multiplying the total gain by

the ratio of nonqualified use to the entire period of ownership after January

1, 2009:

gain x

nonqualified use after 1/1/09 = taxable gain

entire period of ownership after 1/1/09

$155,000 x 3 = $93,000 5

The amount of gain on the sale is $155,000, and the taxable portion is

$93,000 (60 percent).

If the Andersons had rented out the property in order to claim deductions

for depreciation, the sale would also be subject to cost recovery recapture

taxed at a maximum of 25 percent.

The longer the period of ownership in relation to use as a second home, the less

the percentage of taxable gain, but it will never be zero.


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ESTATE TAX ISSUES Estate tax planning is an important issue for individuals with high net worth.

Real estate professionals do not need to be experts in estate tax matters, but

they should be aware of some the tax triggers so that they can advise clients

and customers to seek expert advice.

Federal estate tax is calculated on the basis of the total value of all a decedent’s

assets in excess of a specified level; the total value can be applied to the lifetime

exclusion amount of $11.18 million, as of 2018. The total value, or equity, of the

estate generally does not include certain assets such as life insurance proceeds

paid to another beneficiary or a home occupied by a surviving spouse.

Therefore, the equity of the estate may or may not subject the estate to federal

estate taxes depending on whether the equity of the estate exceeds the lifetime

exclusion amount. Transfers of property between spouses, known as the

marital deduction, are exempt even when one spouse passes away, except if the

surviving spouse is not a U.S. citizen. If the value of the estate exceeds the

lifetime exclusion, the excess amount is taxable. Under the current tax

structure, only a small percentage of estates actually pay estate tax but

compared to ordinary income and capital gains tax rates, the rates are quite

high.

Same-Sex Spouses

In August 2013, the IRS ruled that same-sex spouses who are legally married in a

jurisdiction that recognizes same-sex marriages are treated as married for all

federal tax purposes including estate tax. The ruling applies regardless of where

the couple lives. The ruling does not apply to domestic partnerships.

Life Partners and Non-U.S. Citizen Spouses

Unmarried life partners are not accorded the same federal estate tax benefits as

married couples. Non-U.S. citizen spouses, even if legal residents, are also at a

disadvantage for estate tax.

The IRS does not allow a marital deduction for property bequeathed to a non-

U.S. citizen spouse. They may receive annual gifts of up to $152,000 (effective in

2018) from their citizen spouses without tax implications. But all of a citizen

spouse’s assets are included in the gross estate, including the share of a jointly

owned principal residence. Estate value in excess of the amount offset by the

unified credit is taxable. The IRS rationalizes that a non-U.S. citizen surviving

spouse may circumvent future tax liabilities by leaving the U.S., transferring

assets out of the country, and renouncing residency.

Unmarried couples are not allowed to claim a marital deduction. They can make

annual gifts to each other up to $15,000, but they cannot take advantage of the

federal marital deduction for transfer of their estates.


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Financial planners may advise life partners and spouses of non-U.S. citizens who

own substantial assets to establish a trust, usually a qualified domestic trust

(QDOT), to receive estate assets and manage the potential tax burden.

If you are working with high-net-worth clients who are unmarried couples or

non-U.S. citizen spouses, a recommendation to consult with a financial planner

or tax advisor about estate tax issues may be much-appreciated advice.

GIFT AND GENERATION-SKIPPING TAX

Gifting assets to intended heirs during life, instead of as a bequest, moves assets

out of the gross estate. It also provides the givers the pleasure of making the gift

during their lifetime and assures that assets go to particular individuals. An

individual can make an annual gift to any other individual, free of gift taxes or

reporting, of up to $15,000 per recipient; each spouse can make gifts up to that

amount for a total of $30,000 in a year to any other person. When a gift exceeds

$15,000, the value of the gift is based on the fair market value as of the date of

the gift and not on the donor’s basis. This includes an interest in real property.

Gift tax is paid by the donor if the gift exceeds $15,000, but, in reality, very few

donors ever pay a gift tax. This is because as taxable gifts are made during the

donor’s life, although a gift tax return must be filed, no tax is payable out of

pocket until the cumulative amount of lifetime taxable gifts exceeds the

exclusion limit. Payment of medical expenses or college tuition is not subject to

gift tax if the payments are made directly to the institutions; these are known as

“direct transfers.” The top gift tax rate is 40 percent.

Note: A common misconception about gifts is that any gift over the exclusion

results in the payment of gift tax. This is simply not true in 99.9 percent of all

gifts because the gift value in excess of $15,000 is applied against the lifetime

exclusion amount, which is $11.18 million in 2018. The gift tax return Form 709

simply keeps track of the remaining lifetime exclusion amount.

A common occurrence is for a parent to make a gift of an interest in property to

a child or other beneficiary as a means of avoiding probate. Transferring a title

or adding an individual to the title of real estate can have gift tax consequences.

Adding an individual to the title of real estate and granting them a half

ownership and a survivorship interest will usually exceed the $15,000 annual

limit. Attorneys and tax advisors who are experts in estate planning should be

consulted.

Gifts and bequests from grandparents to grandchildren can trigger generation-

skipping transfer (GST) tax. Gifts and bequests made to heirs who are not direct

descendants, such as the children of a life partner, can also trigger GST tax of 40

percent if the recipient is 37.5 years younger than the donor. The unified credit

for gift and estate tax can be used for generation-skipping tax. If you are aware

Payment of medical expenses or college

tuition is not subject to gift tax if the payments are made directly to the

institutions.


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that clients intend to bypass their adult children and give or bequeath high

value property to grandchildren, your recommendation to seek expert tax

guidance could be welcome advice.

CAN AN IRA OWN REAL ESTATE? A traditional IRA, Roth IRA, or SEP can own real estate in a self-directed account.

Eligible types of property are land, commercial property, rental condominiums

or residential property, trust deeds, and real estate contracts. The purchase

must involve an IRA custodian or trustee specializing in real estate. The

custodian or trustee actually makes the purchase on behalf of the account

owner and holds the title to property. There are some important limitations to

be aware of. An owner cannot have any personal use of the property, which

means that a personal residence or vacation home cannot be owned by an IRA.

Real estate that is already owned cannot be placed in the IRA. Property owned

by immediate family (spouse and children) cannot be purchased. All of the

property expenses, such as taxes, insurance, and repairs, must be paid from

funds in the IRA, which means liquid funds must be available in the account.

Income generated from the investment is deposited in the IRA; the IRA owns

the property, which can provide the liquid funds needed for expenses. Real

estate may be withdrawn from an IRA for use as a residence or vacation home

when the owner reaches age 59½; the IRA can sell the property or transfer the

title to the owner. Income tax will be due on the current value of the property if

it has been held in a traditional IRA; if the property was held in a Roth IRA, there

is no tax on the distribution. A client who is interested in purchasing real

property to hold in an IRA or SEP should seek out a specialist in real estate or

self-directed IRAs. An easier way is to invest in a real estate investment trust

(REIT), which is similar to a mutual fund.

TAX-DEFERRED 1031 EXCHANGES

Note: The place for the real estate professional in a 1031 exchange is to bring

the buyers and sellers to the closing table. The exchange, and all parties to the

exchange, should consult with both legal and tax advisors. While a qualified

intermediary (QI) or accommodator is not technically required by law, we

recommend that the client intending to complete an IRC 1031 exchange contact

such a professional.

Over the years of building careers and accumulating assets, many in the 50+ age

range acquire investment and commercial properties. When the time comes to

reconfigure a real estate investment portfolio or convert business property, the

tax-deferred 1031 exchange enables postponement of capital gains tax.

Federal tax law allows taxpayers to defer capital gains tax on the exchange of

property used in trade or business or held for investment. A 1031 exchange

postpones but does not eliminate taxes, although with the basis step-up that


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occurs when a property is transferred to an heir, capital gains taxes are in

essence forgiven at that time. A real estate professional should be able to

recognize situations in which a 1031 exchange would be permissible and

advantageous to a client and assist clients in finding the needed experts to carry

out the exchange.

A 1031 exchange involves an exchange of like-kind real estate. It is treated

under the tax code as a continuation of the ownership of the property instead

of a taxable sale. The tax-deferred exchange of assets is neither a tax loophole

nor a privilege available only to wealthy investors. It is a method of equity

preservation available to all owners of investment and trade or business

property. The benefits extend beyond conserving capital assets. Tax-deferred

exchanges can be used to:

Increase equity by deferring capital gains tax.

Acquire property with more appreciation potential.

Consolidate assets by combining several properties into one larger asset or

diversify holdings by exchanging one large asset for several smaller ones.

Acquire a future retirement residence. (Special rules apply.)

Divide real estate holdings prior to distribution to heirs.

Relocate or increase investment holdings in another location.

Obtain space for business expansion.

Dispose of underperforming property.

Increase net cash flows by acquiring a property with better financing.

Obtain non-taxable cash by acquiring property that can be mortgaged.

(Special rules apply.)

Increase depreciable property basis by acquiring higher-value property or

exchanging bare land for improved property.

Increase estate value by acquiring more valuable properties.


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BASIC RULES FOR TAX-DEFERRED 1031 EXCHANGES

Under the Tax Cuts and Jobs Act, Section 1031 now applies only to

exchanges of real property and not to exchanges of personal or intangible

property.

The properties, both old and new, must be used in trade or business or held

for investment. Property that is held for resale is considered dealer property

and is not eligible for a 1031 exchange. A personal residence is not eligible

for exchange.

Property must be exchanged for like-kind property.

The names of title holders on the replacement property must match those

on the title of the relinquished property.

Replacement property must be identified within 45 days of transferring the

relinquished property.

The replacement property must be acquired (closed) within 180 days of

transferring the exchange property or the tax filing deadline, whichever

comes first. The tax filing deadline can be extended to preserve the 180-day

replacement method.

There is no limit on the number of properties that may be relinquished.

The limits on replacement properties are one of the following:

Maximum of three replacement properties without regard to fair market value (otherwise known as the "three-property rule," which is the most commonly used)

Any number of replacement properties with aggregate value not exceeding 200 percent of the value of the relinquished property

Any number of replacement properties if the exchanger receives 95 percent of the aggregate value of all identified properties

What Is Like-Kind?

The term “like-kind” is one of the concepts most widely confused by investors

who think erroneously they must acquire a replacement property exactly like

the relinquished property. Like-kind does not refer to the type of property;

instead, it addresses the use of the property. A property used in trade or

business or held for investment must be exchanged for property to be used in

trade or business or held for investment.


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Some examples of like-kind are:

A condominium for a duplex

A rental house for a multiunit rental

Bare land for an apartment building

Ranch land for an office building

Several rental houses for an office building

Property Not Eligible for 1031 Exchange (Either Relinquished or Replacement)45

Personal residence

Domestic properties for foreign properties

Stock in trade and other property held primarily for sale (inventory or dealer

property)

Stocks, bonds, notes, or other types of securities, evidences of

indebtedness, or interest

Machinery, equipment, vehicles, artwork, collectibles, patents and other

intellectual property and intangible business assets

Taxable Boot

Cash or non-like-kind property, known as boot, received in an exchange is

taxable. For example, if an exchanger acquires a replacement property of lesser

value than the relinquished property, the resulting cash out would be taxable.

Mortgage relief is also considered taxable boot. Although the exchanger is taxed

on the boot received, that tax will be less than the amount of capital gains tax

owed on an outright sale of the property. In any case, the amount of tax owed

on boot can never exceed what would be owed on a sale.

Documenting the Intent to Exchange

When the intent is to transfer and acquire property through a tax-deferred 1031 exchange, the purchase and sale agreement (or an addendum) should contain language reflecting the exchanger’s intent and requesting the other party’s cooperation. If the exchanger decides prior to closing not to proceed with the exchange, the transaction is simply closed as a taxable transaction. The wording could be as follows: “It is the intent of the seller to perform a Section 1031

45 Under the Tax Cuts and Jobs Act, Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property.


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exchange, and the buyer is asked to cooperate by signing an Assignment Agreement at no cost or liability to the buyer.”

EXCHANGING A VACATION HOME Vacation homes held for both personal use and investment purposes can be

viewed as mixed-use. It is possible for the character of the property to take on a

primarily personal appearance even with the occasional rental activity. In such a

case, the property will be considered primarily personal in use and will not

qualify for a 1031 exchange. Because it does not qualify as a personal residence,

the disposition or sale of the vacation property will produce a taxable event. If

personal use of a vacation home is minimal (no more than 14 days or 10 percent

of the days it is rented out), it can be successfully argued that the property is

held primarily for investment. Where income earned has been substantial, it can

also be successfully argued that the property is primarily for productive use in a

trade or business. Both uses qualify the property for 1031 treatment.

PERSONAL RESIDENCE RECEIVED IN AN EXCHANGE

What if an investor purchases a residential property that is not currently a rental

property, in an exchange? A property acquired in a 1031 exchange and later

converted to a principal residence must be owned for five years and lived in for

two years from the date of the exchange before the owner can sell the

residence and claim the $250,000 (S)/$500,000 (MFJ) capital gains exclusion on

the sale of a principal residence. If the exchanger moves into the property

immediately after the transaction, it could invalidate the exchange on the basis

of non-like kind. Most exchange experts counsel that the exchanger should wait

two years before moving into the residence. In the interim, the property could

be rented, at fair market rent, to a tenant. The tenant could even be a family

member, such as a child, but the IRS may scrutinize the validity of the lease

when family members are involved.

CASE STUDY

Edward wants to relocate to Scottsdale, Arizona, from Albany, New York. He

currently owns an income property, Center Court Apartments, in Albany. He

would like to maintain an investment in rental property and wants to

acquire a similar property in Arizona. If he sells the Albany property

outright, he will face a hefty tax bill. A tax-deferred exchange of real

property seems like a good option.

Susan lives in Scottsdale, Arizona, and owns Silver City Apartments. She

recently inherited the apartment building from her father’s estate and has

no interest in being a landlord. She would prefer to sell the property.


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Bob recently received a cash windfall from stock options and would like to

put his money into real estate. He currently does not own any investment

property.

1. Edward engages the services of a QI. On May 1, Edward contracts to sell Center Court Apartments to Bob for $1,000,000 with a closing date of May 17. Edward assigns all rights in his agreement with Bob to the QI.

2. On May 5, Edward notifies Bob in writing of the assignment of rights and on M ay 17, Bob and Edward close on the sale of Center Court Apartments.

3. Bob pays $100,000 at closing into Edward’s escrow account with the intermediary (QI).

4. On June 1, Edward identifies Silver City Apartments as a replacement property (within the 45 days).

5. On July 5, Edward contracts to purchase Silver City Apartments from Susan for $900,000, assigns his rights in that agreement to the QI, and notifies Susan in writing of the assignment.

6. On August 9, the QI pays $900,000 to Susan and deeds Silver City Apartments to Edward. The QI then transmits the remaining $100,000 to Edward to close the exchange. Edward will have a partially-taxable exchange due to the $100,000 (cash boot), but he can deduct his exchange expenses from the $100,000 to determine how much is taxable.

A visual representation of this 3-way exchange follows on the next page.


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QUALIFIED INTERMEDIARIES

In the preceding example, a qualified intermediary handles the exchanges of

deeds and cash. Exchange transactions are complicated endeavors and if not

carried out correctly, the tax benefits are lost; therefore, the involvement of an

expert is essential. An exchange accommodator, a qualified intermediary (QI),

should be involved before elements of the transaction are put into play. Use of

the QI prevents actual or constructive receipt of cash proceeds, an event that

would disqualify the exchange and produce a tax bill for the exchanger.

It is important to seek out a reputable, experienced, and expert accommodator

to act as intermediary. QIs are not licensed or regulated, except in Nevada. The

Certified Exchange Specialist Designation program offered by the Federation of

Exchange Accommodators provides some assurance of knowledge and

competence. There is no requirement for bonding or insurance, although most

QIs maintain both.

QIs sometimes charge nominal fees because they make a considerable amount

of money from the interest on cash held on behalf of clients. Some QIs keep all

the interest and others keep a portion. An exchange agreement should state the

QI’s split of the interest. The exchange agreement should also stipulate that the

QI cannot resign; QI resignation invalidates the exchange. Encourage your client

to carefully review the details of the exchange agreement and consult with an

attorney. Some exchange agreements go to great lengths to protect the QI but

offer little protection for the client.

WHY EXCHANGES FAIL

Real estate professionals who specialize in exchanges estimate that up to 40

percent of exchange transactions fail for several reasons:

Missed deadlines (the 45-day and 180-day rule).

Lack of suitable replacement properties.

Negotiations breakdown—if the owner of a replacement property knows

that the exchanger has time constraints, it may be used as negotiation

leverage on price or terms.

Lack of patience—for those accustomed to sell and buy transactions, the

sequence and time frames of an exchange, particularly a reverse or deferred

one, can seem overlong and out of sync.

Focusing too much on acquiring the first-choice property and not

developing a “plan B” or contingency plan.


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COMMUNITY PROPERTY

Almost a third of the U.S. population lives in one of the community property

states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,

Washington, and Wisconsin. These states include some of the nation’s fastest

growing urban areas as well as popular vacation-home and retirement locations.

California, Arizona, and Texas alone account for more than 20 percent of the

U.S. population. This is important knowledge for a real estate professional

because community property ownership of real estate is determined by the

location of the property, not the residence of the owner.

The basic principle of community property is this: All property acquired during a

marriage is presumed to be community property with each spouse owning an

equal share. Community property status is retained even if the couple moves to

a common-law state, although separate property moved to a community

property state retains is separate status. The income from community property

is considered community property. In Texas, Louisiana, and Idaho, even income

from separate property is community property unless spouses specifically agree

otherwise.

In the context of capital gains, community property status is important because

when one spouse passes away, both the deceased and the surviving spouse’s

share of the property receives a basis step-up to fair market value. The basis

step-up resets the basis for the entire property. If the surviving spouse sells the

property, capital gains tax will be due only on the amount in excess of the

stepped-up basis. When a married couple owns greatly appreciated real

property, this basis adjustment can yield considerable tax savings for the

surviving spouse; in essence, all the capital gains tax that would be due on the

value appreciation during the couple’s ownership of the property together is

forgiven upon the death of one of the spouses. Property must be titled as

community property, not joint ownership, and be included in the deceased

spouse’s estate in order to qualify for the basis step-up.

Separately owned property can be converted to community property by gifting

one-half of a spouse’s separate property to the other spouse; gifts between

spouses are neither taxable nor limited, except for non-U.S. citizen spouses.

However, if the recipient spouse dies within one year of the gift and the

property is passed back to the original donor, the basis of the gifted portion will

not be stepped up to fair market value.


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TAXES ON SOCIAL SECURITY AND PENSION INCOME

If Social Security is a sole source of income, benefits are not taxable because

they do not exceed the base amount. But 50 percent to 85 percent of Social

Security benefits are taxable if a recipient’s income from other sources exceeds

a base amount.

As a rule of thumb, add one-half of the total Social Security income received to

all other income, including tax-exempt interest. If the total is more than the

base amounts—$34,000 for a married couple filing jointly and $25,000 for

single, head of household, widow/widower with dependents, or married filing

separately—Social Security benefits are taxable as income.

Distributions from pension accounts, deferred compensation, traditional IRAs,

and 401(k) plans are generally taxable because contributions to these accounts

are made with pretax dollars. The advantage is that in many cases the recipient

is in a lower tax bracket during retirement than during working years.

INSTALLMENT SALES

If the seller has substantial equity in the property and does not require a lump-

sum payment from the sale, an installment sale is an option that can provide tax

benefits. The seller pays tax only on the amount received during the calendar

year, instead of the entire amount, which spreads out the tax liability. For tax

purposes, each payment received is apportioned between ordinary income and

capital gain. If the home sold qualifies for the IRC 121 Exclusion and the gain is

under $500,000 for married filing jointly (MFJ) or $250,000 for single (S), then

only the interest accrued each year would be taxable. Title may or may not pass

to the purchaser at the time of the installment sale, depending on state law.

As with any other real estate transaction, the seller should negotiate a down

payment—20 percent down payment is advisable. The seller then assumes the

role of a lender and carries back the loan. The buyer makes regular payments,

usually monthly. At least one payment must be received in the tax year after the

sale. For older sellers, the loan structure should be amortized over 30 years but

due in 10–15 years. This ensures that the principal stays relatively intact and

creates a favorable situation for the heirs.

Benefits

A larger pool of potential buyers

Some buyers look for only properties that offer seller financing. They may

have difficulty getting a conventional loan. For example, sometimes it is

difficult for a self-employed buyer to obtain a conventional loan because of

income-verification requirements, even if the borrower has perfect credit.


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Tax benefits

Tax consequences depend on individual circumstances, but hefty amounts

of taxes can follow a large capital gain—especially in high-value areas. Seller

financing reduces the tax burden by spreading the gain over time as

payments are received. It may prevent being bumped into a higher tax

bracket or allow time to take some capital losses to offset the capital gain.

Good interest earnings

Seller financing rates are usually higher than the rate paid by money market

accounts and CDs.

Relatively safe investment

Seller financing with at least a 20 percent down payment and a responsible,

creditworthy buyer can be a very secure investment. The seller receives

monthly income, with a relatively high interest rate, and the investment is

secured by real property.

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RISK MANAGEMENT ISSUES

Many real estate brokerages have a program of risk-reduction measures to deal

with common issues such as client representation, records management, and

agent compensation. Working with clients and customers in the 50+ market can

present distinct issues, situations, and challenges. Real estate professionals

need to know how to respond to protect their clients’ interests as well as their

own. Even with the best of intentions, lack of awareness can lead to delayed or

disrupted transactions and sometimes conflicts of interest. Real estate

professionals can protect themselves, their clients, customers, and transactions

by asking the right questions and knowing when to advise their clients to seek

legal counsel.

The following discussion deals with general principles of legal issues; your

instructor will alert you to state-specific issues and regulations.

CONFIDENTIALITY ISSUES The REALTOR® Code of Ethics affirms the responsibility to maintain client

confidentiality. Real estate professionals who specialize in the 50+ market know

that there can be distinct challenges to overcome when clients are very elderly

or infirm.

A relative or child may make first contact

In a crisis situation, it is often an adult child or other relative who makes the

first contact. The real estate professional should ask tactfully if the elder

buyer or seller is aware of the conversation and a willing and informed

participant in the transaction. It is also important to establish if the family

member has the legal authority, such as a power of attorney, to conduct the

real estate transaction.

Verify ownership and identity

If in doubt, take the extra step to ascertain true ownership of the property

and who has the authority—power of attorney—to rent or sell it. Ownership

can be verified with a quick check of tax records. Also, verify the identity of

the person you are talking with and the relationship with the elderly owner.

Ask for permission to share confidential information

A real estate professional must deal with the owner directly unless

authorized to deal with others, such as family members. The real estate

professional should ask for, and document, an elder client’s permission to

share transaction information with family members. The Code of Ethics

states that REALTORS® must keep client information confidential, but the

client can consent to sharing information.


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Involvement of family members

Relatives or caregivers can assist both the elderly homeowner and the real

estate professional by acting as guides, interpreters, and facilitators. They

can help an elder work through the emotional and practical issues that may

be involved in selling a home. A real estate professional can help by keeping

the relative up to date and providing copies of transaction documents.

Adult children don’t always know

Adult children may have little or no knowledge of the parent’s financial

affairs. Furthermore, children may be inexperienced when it comes to

buying and selling real estate and lack market knowledge. The real estate

professional can help by identifying needed information and sources.

Provide information on alternatives

When the children live in another community or state, they may be

unaware of care and community support services that could help an elderly

parent remain in the home. A specialist can help a family make choices by

providing information and contacts and sharing examples of what other

families have done.

Be alert

Unfortunately, even family members can have bad motives and intentions.

The real estate professional should be on the lookout for fraud such as

selling properties out from under elders. The REALTOR® Code of Ethics

states that a REALTOR® is not bound by confidentiality if a crime is intended

and can be prevented.

SELLING BELOW MARKET

Experienced real estate professionals advise caution when asked to list a home

at a below-market price. Why does this happen? Consider these circumstances:

The seller accepts a below-market offer in order to sell the home to a

relative and other family members question the deal.

A high-value home is priced low for quick sale and the heirs question the

deal.

The seller says, “This is how much I want. I just want a quick sale.”

What should the real estate professional do? Write a letter to the client stating

that the property is listed below market value. Prepare a CMA showing the

current value and ask the seller and buyer to sign it in order to acknowledge the

below-market price or offer. Keep all the documentation justifying the price.

Market the property as a “best value in the community.”


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POWER OF ATTORNEY A power of attorney authorizes a person to act as a legal representative, an

attorney-in-fact, for another and to make binding decisions in medical, legal,

and financial matters. Authority can be unlimited in scope and duration or

limited to a specific time frame or certain types of decisions, such as medical

care.

Creating a power of attorney can be a rather simple process, but the specific

language required for certain types of powers of attorney can vary from state to

state, so it is best not to try to create one on your own. A number of websites

offer power of attorney forms for free or low cost, but these may not be

tailored to your state. Financial and health care institutions often provide, and

prefer, their own forms because their attorneys have reviewed the forms to

ensure they are legally adequate for the purposes of those institutions. When

having an older adult sign documents, it may be beneficial to have a witness

present who may sign a statement that the witness was present and establish

the witness' relationship to the owner. A valid power of attorney document

requires notarization and possibly the signatures of one or more witnesses.

A power of attorney may take effect immediately, at some point in the future,

under certain specified conditions, or a springing event, such as incapacity due

to illness. States do not generally require registration of powers of attorney with

one exception: real estate transactions. Some states require registration of a

power of attorney for real estate transactions with the land records office.

Real estate professionals should be alert for the following issues related to

powers of attorney. Although not specific to the elderly, these issues can arise

more frequently when working with senior clients.

Proof of power of attorney

If someone other than the owner claims to be authorized to act for an elder

in a real estate transaction, it is appropriate to ask to see proof of power of

attorney or an attorney’s letter attesting to such authority. If a transaction

involves someone acting under a power of attorney, a copy of that power of

attorney will become a part of the transaction documentation.

Power of attorney ends with death

A power of attorney terminates when the grantor passes away or becomes

incapacitated. After the power of attorney is terminated, it does not

authorize the holder to settle estate matters or dispose of property. If

someone claims to have power of attorney to dispose of real property after

the owner has passed away or become incapacitated, the real estate

professional should ask for verification of authority. Upon death, an

executor, named in the will or appointed by the court, assumes

responsibility for settling estate matters and disposing of property as


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directed by the terms of the will. Court-issued testamentary letters

authorize an executor to transact estate business.

A durable power of attorney differs from an ordinary power of attorney in

that it will survive the incapacity of the grantor and may, in fact, only come

into effect upon the incapacity. The real estate professional should still ask

for verification of authority in situations where someone claims to have

authority to buy, sell, or manage property for a principal who is

incapacitated.

A health care proxy cannot authorize other actions

A power of attorney authorizing decisions about medical care, sometimes

called a health care proxy, does not authorize the holder to act on other

matters. Completion of a durable power of attorney often accompanies

creation of an advance directive, or living will, specifying limits on

resuscitation or invasive life support measures. But that power of attorney

may be limited only to medical decisions and immediate financial needs.

The health care proxy does not have the authority to sell or transfer

property to heirs or handle estate matters.

Acceptance in other states

Although states generally recognize powers of attorney granted in other

states, details, such as the number of witnesses, can stall acceptance of the

authority to act. Hospitals and financial institutions, like banks, mortgage

companies, and insurers, may require completion of their own power of

attorney forms. When a power of attorney must cross state lines or several

institutions are involved, completion of several powers of attorney forms

may be necessary to ensure that the authorized person can take action. This

is especially important when real estate is involved and the attorney-in-fact

resides in another state—particularly if the state requires registration of a

real estate power of attorney.

Spouses do not have an automatic power of attorney

A surviving spouse has authority to make decisions regarding jointly owned

property with right of survivorship (joint tenancy or tenancy by the entirety)

and to manage jointly held bank accounts. But if one spouse becomes

incapacitated, the other does not automatically have the authority to

dispose of property or make decisions about financial matters. As we will

see in the following section, it may be necessary to petition for a court-

appointed guardian when issues of competency or incapacity are involved.

In a situation like this, the real estate professional should verify that the

spouse has authority to act in real estate transactions.


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Terminating a power of attorney

As noted above, a power of attorney ends when the grantor passes away.

But there are other conditions that terminate a power of attorney:

Divorce (durable power may survive in some states)

Inability of the designated person to assume the duties and no successor is specified

Invalidation by a court

Revocation by the grantor

What if no power of attorney exists?

Sometimes action must be taken to safeguard assets or complete a

transaction, but the person who has authority to do so is no longer capable

or competent or has passed away. When no one else is authorized to act,

someone may petition the court to appoint a guardian or conservator to

protect the interests of the incapacitated person or other interested parties.

Before listing, or upon taking the listing before marketing, have a title company

with which you have a relationship look over the power of attorney. The title

company will need to see the power of attorney at some point in the

transaction and is often willing to review this prior to the transaction taking

place; the same process applies for trusts.

CONSERVATORS, GUARDIANS, AND EXECUTORS

The courts may appoint a conservator or guardian with the authority to manage

the personal needs and financial resources of the person who lacks legal

capacity. Or the courts may appoint an executor to settle estate matters.

What is the difference?

Conservator

Appointed to manage property

Guardian

Appointed for the protection of a person or an estate

Executor

A personal representative identified in a will as responsible for carrying out

the instructions and wishes of the deceased

Administrator

A court-appointed estate executor


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Conservator

A conservator is appointed to manage the assets of people who lack capacity to

make decisions. Although laws vary among states, the conservator usually needs

court authorization to sell real estate. The court may appoint the same

individual as conservator and guardian.

Guardian

A court-appointed guardian for a person is responsible for ensuring food,

clothing, shelter, and medical needs are met. A guardian for an estate is

responsible for managing financial affairs. The same individual can be a guardian

for both the person and the estate. The spouse is usually the court’s first choice;

the second choice is a child or relative. If a relative is not available and able, the

court may appoint some other party or a public guardian. A person who is to be

placed under guardianship is entitled to receive a copy of the application, be

present at hearings, and be represented by an attorney. The party filing the

application for guardianship must prove incapacity. In emergency cases, a court

may appoint a temporary guardian if the person or property is in imminent

danger.

Executor

The executor accounts for all the assets of a person who passes away and makes

sure heirs receive inheritances per the instructions in the testator’s will. The

executor also settles debts and taxes owed by the estate. An executor usually

has the authority to sell real property if needed to settle debts and pay

expenses, like medical and funeral expenses. The will, however, must expressly

authorize sale of real property for any other purpose.

A real estate professional, whether representing a buyer or seller, can ask for

verification of an executor’s authority to sell a property and should not assume

that a person appointed to act as executor knows the extent of authority

granted in the will.

Who Cannot Be Appointed

People who cannot serve as guardians or conservators include:

Minors

Anyone involved in a lawsuit or adverse claim against the person or

property or who owes a debt

A nonresident without a resident agent

Someone specifically eliminated in a will or designation of guardianship


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Disadvantages

Disadvantages of court appointment proceedings are:

Records and proceedings are public record

Expense of court costs

Appointee may be a stranger

Recovery requires court proof

Conflicts of Interest

Real estate professionals who specialize in the 50+ market often develop close

relationships with their elder clients. But a real estate professional should not

become a trustee, guardian, or conservator for a client without first consulting

an attorney. Despite good intentions, the situation can be fraught with potential

conflicts of interest, and family members may accuse the real estate

professional of taking advantage of their elderly relatives.

COMPETENCY ISSUES

A child may state that a parent is not competent to handle business affairs, but

the parent is still the owner of the property and the deal cannot go forward

without consent and signature. The parent is viewed as competent until

declared legally incompetent.

Remember, appearances can be deceiving. Years of observing social

conventions—“Hello, how are you? I’m fine.”—become durable habits that even

those in advancing stages of dementias and Alzheimer’s can summon up like a

reflex. But, in the next minute, they forget who they spoke to or fail to recognize

family members. Medical professionals refer to this as social convention

abilities.

The real estate professional must handle this situation very tactfully and avoid

the appearance of doubting the family member or caregiver. However, do not

let yourself be put in the position of judging the veracity of statements,

authenticity of documents, or competency of clients. Ask for proof of a power of

attorney or court appointment as a conservator or guardian and appropriate

authorization.

The best course of action may be to withdraw from a conflicted situation until

the competency issues are resolved. If you are a buyer’s representative and

your client makes an offer on a property that is embroiled in a family conflict,

make sure the contract is contingent on an attorney’s review to ensure that the

buyer receives a clear title.


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Case Study: Five Acres for Sale

Real estate professional Rhonda received a call from Cal Marsh stating that he

owned a five-acre lot and was interested in listing it for sale. Rhonda was

familiar with the property and

thought that Cal’s mother was the

owner. In checking tax records,

Rhonda discovered that the property

was in fact owned jointly by Cal’s

mother and aunt. When she asked Cal

Marsh about the ownership, he stated

that he handled his mother’s business

affairs. Rhonda wrote the listing

contract, but Cal’s mother refused to

sign it. His aunt also refused to sign the listing contract. A several-years-old

appraisal valued the property much higher than the current market value. The

market dropped since that appraisal but the aunt could not understand why

the property would not fetch the same high price now. Cal said his mother

was not competent to sign a contract, but she seemed lucid when Rhonda

met her.

What are the issues involved in this scenario? What would you do in this

situation?

.


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Case Study: Letting Go

Soon after Marty and June celebrated their 50th wedding anniversary, Marty suffered a stroke that severely impaired his cognitive abilities. When Marty

was moved from the hospital to a care facility, June moved in with her daughter. It was clear to all that she could not manage on her own. June’s daughter called real estate professional John and asked him to help sell her parents’ home. She said that her father, who used to handle all the financial matters, was incapacitated, and her mother could not deal with all that goes into listing,

showing, and selling a house. Everyone is suffering the loss and the realization that Marty will not recover; June is depressed and has become very withdrawn lately. When John asked about the ownership of the house, June’s daughter said that as far as she knew her parents owned it jointly—they shared everything.

What are the issues involved in the situation? If you were June’s agent, what would you do?


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WHEN A CLIENT DIES OR BECOMES INCAPACITATED

What happens if a client dies during a transaction, the term of a listing, or after

making an offer to purchase? Generally, if a seller passes away during the term

of a listing, the authority to market and sell the property per the listing contract

terminates. A commission may still be due the listing agent if there was an

accepted offer prior to the death. If a buyer passes away, it does not necessarily

cancel an accepted offer to purchase. From a practical standpoint, the buyer’s

representative may wish to discuss the situation with the listing agent and work

out a settlement short of the estate buying the property. Once appointed, the

buyer’s personal representative or the executor of the estate may either

complete the transaction or negotiate a contract termination.

When a buyer or seller becomes incapacitated, it is a much murkier situation.

Unless the individual has executed a power of attorney authorizing another to

handle legal matters, a court proceeding is needed to designate a

representative to act on behalf of the buyer or seller.

PROBATE

The probate process ensures—literally proves—that the intent of a decedent is

followed. Probate proceedings can last up to a year or longer, and expenses can

run as high as 10 percent of the estate. The proceedings are public record, and a

court-appointed administrator may not be a relative, which involves an outsider

in family matters. On the other hand, probate is a court-ordered proceeding,

provides notices to creditors, and provides a process for settling objections by

heirs and creditors.

Some assets pass to heirs outside of probate. For example, life insurance

proceeds paid to a beneficiary other than the estate itself are not subject to the

probate process. Property titled as joint ownership with right of survivorship

and community property with right of survivorship (where allowed) pass to the

joint owner outside of probate. Assets held in a trust generally bypass probate.

Listing a Property in Probate

The court decides the necessity or advantage of the sale.

The sale may be ordered to pay debts and taxes.

Publication of a sale notice is required unless waived in the will.

The listing is signed by the personal representative with approval of the court.

The court approves the amount of brokerage compensation.

A hearing is required to confirm the sale.


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LIFE ESTATES AND TRUSTS

A trust is an estate planning entity that manages the use and distribution of

assets. A trust that is created during the owner’s lifetime is called a living trust.

A trust that is created upon the owner’s death is called a testamentary trust. A

living trust holds assets during life and distributes them at death. A trust can be

revocable, which means it can be changed or revoked any time prior to death,

or irrevocable. By holding real estate in a trust, individuals can preserve the use

of the home for themselves and control the eventual transfer to heirs without

probate. Upon death, the trustee takes over administration, and the trust

continues for the benefit of named beneficiaries. A trust can also be used during

the owner’s lifetime to plan ahead for possible incapacity and avoid

appointment of a conservator or guardian. Creation of the trust and transfer of

assets to it are not a matter of public record, so privacy is maintained.

The trust can hold real estate and pass it to heirs without the need for probate.

This is advantageous for the heirs of an individual who owns real property in

another state because it avoids the hassles of going through a probate process

in more than one state. In an era of blended families as a result of divorce and

remarriage, a trust arrangement also ensures that estate assets go to the

intended heirs.

An attorney should create the trust documents and assist with transfer of assets

to the trust (the cost is usually $1,200–$1,500). Unfortunately, boiler-room sales

operations sometimes target the elderly and use high-pressure tactics to sell

living trusts; the victim pays several thousand dollars for what amounts to a set

of preprinted forms.

A/B or Marital Trust

Spouses can establish an A/B, or marital, trust to create a federal tax exemption,

twice postponing tax on their estate. Each spouse puts his or her property into

the trust. When the first spouse dies, his or her half of the property goes to the

beneficiaries named in the trust, usually the couple’s children, with the

important condition that the surviving spouse has a life estate, the right to use

the property for life, and is entitled to any income it generates. When the

surviving spouse dies, the property passes to the trust beneficiaries. It is not

considered part of the second spouse’s estate for estate tax purposes. Using this

type of trust keeps the second spouse’s taxable estate at half the size it would

be if the property were left directly to the spouse. This type of trust is also

known as a marital life estate trust or credit shelter trust.

Note: Tax legislation referred to as the Deceased Spouse Unused Exclusion

(DSUE) can accomplish many of the same benefits as the A/B Trust.


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Does Your Client Own Real Estate in Mexico?

Low cost of living, mild climates, upscale housing developments, and ease of travel draw many U.S. retirees to Mexico. Real estate ownership in most of the desirable locations is restricted. Within 100 kilometers of the borders, or 50 kilometers along coastlines, foreigners can own real property through a trust called a fideicomiso. The owner’s trust interests, however, pass to named beneficiaries outside of probate—an advantage for heirs.

ELDER LAW ATTORNEY As we have seen in the preceding material, working with buyers and sellers in

the 50+ market, particularly the elderly, can present some distinct issues. An

attorney who specializes in elder law can help elders and their families deal with

immediate issues and plan ahead for life transitions. Although this chapter has

covered a number of issues that arise when a property owner passes away, an

elder law specialist deals with a broader range of concerns. Attributes that

distinguish the elder law attorney are:

Life-Focused

emphasizes sustaining a long life

Integrated

Incorporates legal issues into the larger picture of maintaining

independence and quality of life

Interdisciplinary

Partners with other professionals—real estate professionals, social workers,

health practitioners, financial planners—in a holistic approach46

Certified Elder Law Attorney (CELA)

The National Elder Law Foundation (NELF) offers a certification program for

attorneys who specialize in and devote a substantial portion of practice to elder

law. The NELF certification is approved by the American Bar Association. The

foundation offers an online directory of certified attorneys. NELF certification is

voluntary, and many attorneys who are competent and experienced in the field

of elder law do not hold the certification. However, the CELA certification

demonstrates an investment in and commitment to the specialty.

46 Charles P, Sabatino, “Elder Law, a Perspective on Present and Future,” American Bar Association Commission on Law and Aging, http://new.abanet.org/aging.


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Checklist: Selecting an Attorney

Does the attorney have expertise and a good track record in the area of law

you need?

Does the attorney explain legal terms in a straightforward manner?

Will you feel comfortable working with the attorney and sharing

confidential information?

Does the attorney pay attention, take notes, ask questions, and follow up on

the points you bring up? Does the attorney return your calls within a

reasonable time?

Is the attorney’s appearance and demeanor professional?

Is the attorney willing to provide references?

Ask what schools the attorney graduated from; check credentials with the

state bar association.

Look at the condition of the office. Does it look organized and well run?

Is the computer equipment up-to-date and a match for the staff?

The office location is a good indication of rates to expect. Are the firm’s

costs reasonable? Are you paying for a firm name but receiving the services

of a law clerk? If an associate lawyer is working with you, is the associate

supervised by a senior attorney?

Hourly rates should not always be the only determining factor. An attorney who

has low hourly rates but lacks expertise may need more time to complete a job

and actually cost more in the long run than an attorney with higher hourly rates

and the expertise to do the job properly.


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As we have seen in preceding chapters, demographics alone tell us that the 50+

real estate market segment will expand as mature adults and baby boomers age

and live longer, healthier lives. Although most prefer to stay in familiar

communities, their housing needs and preferences will change as they age

through life phases. For the real estate professional, now is the time to start

building relationships that will pay off in the future. It’s a well-known fact that

buyers and sellers like to do business with people they know, but there is a lot

of competition for consumers’ attention and loyalty. How can you get

acquainted with prospects in the 50+ market, distinguish yourself, and

communicate a winning value proposition?

Earning the SRES® designation says a lot about your commitment to and

seriousness about serving mature and baby boomer buyers and sellers. In this

chapter, we will look at practical steps you can take to put the SRES®

designation to work for you in your marketing plan. We’ll look at how to make

contacts and establish relationships as well as do’s and don’ts of marketing to

mature and baby boomer consumers. As many specialists will attest, the real

estate professional who invests the time and effort today in nurturing a network

of prospects will gain a reputation as a trusted real estate advisor that will pay

off in the future.

THE HALF-CENTURY CONSUMER

How do people who have reached and surpassed the half-century mark view

themselves as consumers? What are their needs and wants in a home for today

and the future? And what are the best ways to approach them and win their

attention and loyalty?

Conservative, Loyal, Frugal

Mature consumers imbue brands with trustworthiness and authority and

consider brand loyalty a virtue. Remember the “This is not your father’s

Oldsmobile” advertising campaign? It is a good example of attempting to

capture the boomer market by playing on the brand loyalty of the parents’

generation. On the other hand, boomers are more likely to experiment with

new and different brands.

Thrifty spending habits characterize the elder and mature consumers who

experienced economic shocks. Fear of outliving assets reinforces their penny-

wise approach. Free-spending boomers have responded to the economic

shockwaves that began in 2008 with a new-found frugality.

Not in a Hurry

Unless faced with a crisis situation, most age 50+ home buyers and sellers don’t

need to rush into a transaction. Regardless of how realistic the viewpoint, both

buyers and sellers have a “waiting for the right price/property” mindset. High-


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pressure tactics will likely backfire. Scare tactics—act now!—may provoke a

reaction, but do not build a long-term relationship. It is better to stress the

benefits than to evoke worry by dwelling on the what-ifs.

Savvy Consumers

Mature adults have a lifetime of consumer experiences including large

purchases and investments. Baby boomers grew up in an era of flourishing

consumerism and have been immersed in it all their lives. Consequently, these

generational groups are very savvy consumers. The real estate professional

must be able to articulate a meaningful value proposition, back up knowledge

with experience and credentials, and demonstrate expertise.

Plus, there is no one-size-fits-all approach to the market. Expert marketers

attest that the companies that are most successful in winning and keeping

market share among mature consumers are those that offer options for

interfacing—face to-face interaction, email, texting, phone, mail, and social

media.

As Old as You Feel? Forever Young?

Aging is not part of baby boomers’ self-image. The most successful companies

never focus on age; they stress the positive aspects of their products or services.

A good example of this is cruise-line advertising, which delivers the message by

showing mature couples enjoying the cruise-vacation experience or by simply

describing the enjoyment and positive aspects of onboard services, dining, and

entertainment. Savvy marketers realize that mature consumers are good at

discerning choices that are right for them. For example, the Hasbro Company’s

advertisements for the large-print version of Scrabble stresses the ease of using

the product and says nothing about the age or ability of the user.

Social

Do not underestimate the power of word of mouth. Mature adults are more

likely to share negative and positive experiences with friends and family and

consider recommendations from them. Given the importance of personal

referrals when choosing a real estate professional, excellent service and asking

for referrals are paramount in gaining and keeping clients. But the biggest

mistake real estate professionals make when working on a referral basis is

failing to ask for future referrals.

Time to Spare?

Mature retired adults generally have more time at home and, therefore, tend to

spend more time watching TV and reading newspapers than other groups. They

also take the time to look at the direct mail pieces they receive, which makes

direct marketing an effective method for reaching the mature market.

The term “senior citizen” is a big turnoff for baby boomers

who see themselves as forever young.


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PROSPECTING STRATEGIES

Sponsor refreshments at a club meeting, bingo game, or bridge tournament.

Sponsor a seminar on any topic of interest.

Provide a speaker for a program.

Show a movie at a senior center.

Volunteer for meals on wheels or provide transportation to medical

appointments.

Let other professionals know that you specialize in mature adult real estate

matters, such as physicians, health care workers, elder law attorneys,

accountants, pharmacists, church or temple staff, golf pros, hair stylists, and

care facility administrators.

Offer no-cost real estate consulting service for mature adults; many

communities offer information services for elders, and you could become

the real estate expert.

Speak at senior communities about moving from one’s long-time home.

Have a downsizing company speak at the same venue to ease the topic of

transitioning.

Supply retirement communities with your handouts for prospective

residents. Use this as an opportunity to develop a relationship with their

senior community.

Post your business card on bulletin boards where mature adults are likely to

gather.

Network with merchants and service providers that target mature adult

clientele.

Get involved with service organizations that tend to have older

memberships, such as Rotary, Kiwanis, American Legion and VFW, Elks,

lodges, and garden clubs.

Purchase a mailing list for zip codes with concentrations of mature adults.

Search local property records for homeowners who have owned the same

property for 10–15 years.

Ask for a copy of a senior center’s mailing list. (Don’t be surprised if the list

is confidential).


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Support and get involved with local politicians who are interested in senior

issues.

Write an advertorial on real estate issues.

Participate in senior-oriented expositions and fairs.

Keep track of where retired people who relocate to your market area move

from and establish a referral contact there.

Get interviewed by the press. Establish your expertise by sending local

media a steady stream of ideas in article or press release format; make sure

the information is substantive and not repetitive. When a reporter needs a

senior real estate source, you will be a likely interview subject.

LAWFUL TARGET MARKETING

By Nan Roytberg


Source: Reprinted from REALTOR Magazine with permission of the National

Association of REALTORS.

It’s a well-established marketing principle that narrowing the segment of

prospective customers you want to attract lets you create a more effective

targeted message and ultimately yields you a better bottom line.

But the Fair Housing Act says it’s unlawful to discriminate against members of

certain protected classes in providing real estate services, even if these groups

don’t fit in with your targeting strategy. More specifically, you can’t “make,

print, or publish, or cause to be made, printed, or published, any notice,

statement, or advertisement with respect to the sale or rental of a dwelling that

indicates any preference, limitation, or discrimination based on race, color,

religion, sex, handicap, familial status, or national origin, or an intention to

make any such preference, limitation, or discrimination.”

With these limitations looming over you, how can you create an effective

marketing plan that focuses on one or more parts of the population without

running afoul of the Fair Housing Act? That’s a difficult question—a question for

which we don’t yet have all the answers.

To date, neither the courts nor the U.S. Department of Housing and Urban

Development have provided specific guidance on some of the more gritty, real-

life questions related to this issue: “Is it okay to describe myself as African

American on my website so prospective clients who prefer an African-American

salesperson can easily find me?”


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Unfortunately, until more guidance is available, the only safe course of action is

to focus your target marketing activities on what’s clearly permissible under the

Fair Housing Act and scrupulously avoid what isn’t—even if it occasionally seems

to put a crimp in your marketing strategy.

What to Avoid

Perhaps the most critical mistake you can make is to base your marketing

decisions on prospective clients’ membership—or nonmembership—in any of

the classes protected by the federal Fair Housing Act or by your state’s fair

housing laws. This means you can’t focus your business plan or advertising

tactics only on Hispanics or Arab Americans and exclude African Americans,

Asians, or Caucasians, for example. Likewise, you can’t market your services

only in Christian-oriented publications or on television, even if you’d prefer to

target only those who want a Christian salesperson. (Note that advertising

restrictions under the Fair Housing Act apply to all forms of print and electronic

media.)

Practitioners who want to specialize in senior housing and issues such as

retirement and reverse mortgages face a similar challenge. Even though you

may legally make customers aware you have special expertise that can benefit

seniors, you must be sure to make your services available to seniors who have

children in their households. And unless a community is qualified as senior

housing under HUD regulations, you must never refuse or forget to show

families with children properties just because many seniors live there. The rule

not to market on the basis of membership in a protected class applies even if

the protected class is one that you belong to. Also note that the Fair Housing Act

makes it illegal for anyone in a brokerage office to be designated as the

associate who automatically services all clients who are of the same ethnic or

racial background as the associate.

Focus on your skills, property

Does that mean then that you can’t let buyers know that you’re fluent in the

language they speak? Not at all. Under the Fair Housing Act, there’s nothing

wrong with marketing yourself as having certain language skills. So long as you

pitch your services to the population at large, not just to those ethnic groups

who speak your language, it’s fine to indicate in your promotions that you speak

Arabic, Spanish, or whatever.

Then prospects can decide to choose you because you share a similar language,

religion, or background, and you’re not choosing them based on some similarity

they have with you.

Strategies

There are other strategies you legally can use under the Fair Housing Act. First,

you’re usually on safe ground if you focus on a property-related niche instead of

a client-related one. A niche marketing plan that’s based on any of the following

property types is perfectly lawful and can be quite effective:


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Fixer-uppers

Condominiums

Single-family homes

Resort housing

Properties in foreclosure

Environment-friendly buildings

Golf course communities

Homes on the historic register

Second, you can focus on individuals’ specific needs that are not covered by fair

housing: relocation, interest in living near particular hobby or sports offerings,

and level of understanding about the buying and selling process. It’s perfectly

lawful, for example, to market to first-time buyers so long as you don’t make

assumptions about the likelihood of any group—such as recent Hispanic or

Asian immigrants—being first-timers.

So, you see, it’s possible to follow the advice of the marketing gurus and target a

niche without violating the Fair Housing Act. But be inclusive in your marketing,

allowing prospective clients to choose whether they want you to represent

them. As for the questions not yet answered by HUD or the courts, play it safe

and abide by clear-cut rules. The National Association of REALTORS® Legal

Affairs department will keep you posted on new information as it becomes

available. Go to www.realtor.org/law-and-ethics.

SIX MARKETING STRATEGIES FOR THE 50+ MARKET Mark Given, CRS, GRI, REALTOR®

My experience has been that mature clients have a sense of respect and loyalty. If you build trust with them they will stay with you. But you can’t just put something in the newspaper, on a billboard, or on a bench. It has to be personal and face-to-face.

Phone Calls—Use the FORD Model

If you have a database of mature clients, they like it if you touch them in a

personal way. When you check on your clients on a regular basis it helps you

build a trusting relationship. I start with a simple greeting, just “Hi, this is Mark

Given.” The next step is to look for common group and I use the FORD model. It

may be hard to talk about occupation when they are retired or dreams when

you don’t know them well. But you could ask what they are doing for a holiday,

or how their family or grandchildren are doing. Next, I state the purpose of my

call, which can be personal or professional. With folks I know well I might say, “I

was just thinking about you,” or “I was just calling to check on you.” Then I try to

end on common ground. I try to be off the phone in 2–3 minutes so that I’m not


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taking up too much of their time, but with some clients, let’s face it, they have a

lot of time. Spend time every day or every week to make these spheres-of-

influence calls. You only need about 50 people to build your business; it doesn’t

take that much time to stay in touch with those 50 people every month. Most

important—no cold calls.

Drop-Bys—Be in the Flow

People will work with people they know, like, and trust, but the next step is

people they are in the flow with. Phone calls are not enough. You need to be in

the flow with people. So, about once a quarter I make a personal visit. I always

call ahead of time. My simple script is, “Hey, this is Mark, I’m going to be in your

direction tomorrow, and I’d like to stop by and see you around 10 o’clock if

that’s okay with you.” When I drop in, I have to be prepared, even if I’m only

staying for 15 minutes, to eat the cookies; the folks who care about you will

have something to share. It’s important for me to also have something to share;

I like to take Hershey’s Kisses. Sometimes if the client has leaves that need to be

raked or grass cut, I’ll send one of my children over to take care of it. My kids

are so used to doing that now that they have really come to love helping out

mature folks. The kindness that you share is always well received.

I also take MLS sheets for properties in the vicinity because mature clients

always like to know what’s going on in their neighborhood with property values.

The MLS sheets give me a chance to talk about that even if they don’t plan to

sell for a long time. If I can drop by once a quarter for 15 minutes, it’s a simple

way to market, and I certainly don’t have to spend a lot of money on newspaper

advertising when I’m engaging prospects personally. Like phone calls, you don’t

have to visit thousands of people.

Direct Mail—It’s Still Effective for Mature Clients

I know a lot of real estate professionals who have stopped doing direct mail

marketing because they think it isn’t effective. But it has always been effective

for me. Mailing pieces to mature clients really works because they look at them,

read them, and often don’t throw them away. I removed someone from my

database one time and when I ran into her several months later she said, “I’m

not getting your cards anymore.” It was amazing. After a long time of contacts

that didn’t go anywhere, I took her off the database, but she appreciated those

postcards and expected them every month. As long as you provide relevant,

interesting information—community news, recipes, trends, a football schedule,

market information—mature clients will be willing to engage with you.

Internet—Make Your Website an Information Source

If you want to engage mature clients online, provide valuable information about

topics such as safety, medical news, aging in place, or a community calendar.

You could link to facilities in your area that design and build for mature clients—


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places they can move to when they sell their home. Think about your

grandparents and the things that would interest them. With boomers, I might

think of what would interest my cousins. If your website becomes a gateway to

relevant information, you become the expert.

Networking—Go Where They Go or Bring the Party to Them

If you haven’t built up your mature-adult business yet, here’s what I would

suggest—go where they go or bring the party to them. It can be anywhere they

go on a regular basis, like a mall where people walk during cold weather. We

have a local fast-food outlet that serves free coffee for seniors every morning

from 6:00 to 6:30 a.m. Ninety percent of the people are there not just to get

free coffee but to socialize. You could go there too. You don’t want to go and

say, “Do you know anybody who wants to sell or buy real estate?” Just show up

on a regular basis with your name tag on. If they become friends with you,

they’re going to start asking you about the market. Then you can start building a

database of folks by just inviting them to receive your newsletter or emailing

them some information and letting them know about your website. And that

can lead to direct mail, phone calls, and drop-bys.

Local speaking engagements have been a success for me. If you can get up the

gumption for public speaking, there are many organizations that are always

looking for speakers with good information. I went to the local chamber of

commerce and asked for a list of organizations that have regular meetings; then

I sent out a notice to let them know I was a local real estate professional and

available to speak. I just gave a market update at a local senior center. About

twice a year I get in front of 40–50 mature clients at this senior center, and I’ve

gained a lot of business from it because I’m seen as a trusted real estate advisor.

Building Referrals—Give Them Something Good to Talk About

I’ve learned that mature clients socialize a lot—they are active and engage in

activities with friends. When clients talk to each other, in particular mature

clients, you have to make sure they have good stuff to say about you. If you are

engaged in all these ways—by phone, mail, face-to-face, and online—you will be

there when they are ready to make a move.


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YOUR VALUE PROPOSITION What does your marketing say about you as a real estate professional, your

specialty, the services you provide, and how you conduct your business?47

Value proposition: Identify the qualities that distinguish you from your

competition and express these qualities in terms of customer services and

value added by your distinctive qualities. This is your value proposition and

promise of customer service.

Repetition: Use this value proposition in all your marketing materials,

website, advertising, and signage.

Logo and tagline: Graphic elements, such as a logo or signature color, and a

memorable tagline stick in a consumer’s mind. Use the same photos on all

your promotional materials.

Consistency: Some make the mistake of tinkering with a personal brand if

they think that results are too slow. This confuses the consumer. Give it

time. Developing a personal brand is a long process.

Commitment: You must be passionate about your personal brand because

creating and sustaining it will take a lot of energy.

Authenticity: Because your personal brand expresses your personal values,

way of doing business, and expertise, authenticity matters the most. Your

personal brand may remain with you throughout your career; it should

become second nature.

Congruence: Your personal brand should be congruent with your broker; a

personal brand that says “luxury property” is a difficult fit if your firm

promotes discount services.

47 Adapted from Resort and Second Home Markets, National Association of REALTORS®.


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EXERCISE: YOUR VALUE PROPOSITION—WHY CHOOSE ME?

What is your value proposition for the 50+ market? Think of the services,

expertise, qualifications, experience, and other qualities that distinguish you

from competitors. How would you express these in terms of client service?

Write a tagline (10 words or less) that communicates your value proposition to

mature or boomer buyers or sellers.


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EXERCISE: MARKET OUTREACH

Your instructor will divide the class into groups and assign each group one of the

following groups: boomer seller, boomer buyer, mature seller, or mature buyer.

Write the title of your assigned group at the top of the provided flip chart page.

Answer the marketing questionnaire based on the assigned group and record

your responses on the flip chart pages.

MARKETING QUESTIONNAIRE

Who is your market? Boomer buyer or seller? Mature buyer or seller?

What are they currently buying or selling?

What do they like to do? What are they involved in? Where do they live,

work, and play?

What marketing efforts will be visible where they live, work, and play?

Billboards? Bulletin boards? Flyers?

What events would they be interested in knowing about or participating in?

What type of information would be of interest and helpful to them?

What magazines, newspapers, websites, and other media are they reading

or listening to?

Do you have a presence in these media?

How do they use the Internet?

Who do they rely on for advice and business contacts, and how could you

connect with these people?

What services do you offer that meet these specific needs?

Does your market have special needs?

What services could you offer that meet these specific needs?

Based on the answers to this questionnaire, what marketing activities could

be used to generate leads?

What items and products might they like to receive by mail or in person?


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SEMINARS AND PRESENTATIONS

Mature, retired adults tend to have a lot

of time available for and interest in

attending events and educational

seminars. Presenting a seminar for clients

in the 50+ age group is a great way to

build your visibility as a real estate

professional and a designee—a Seniors

Real Estate Specialist®. A seminar begins

the process of building a relationship

without making a commitment. Attendees

get an opportunity to get acquainted with

you and check you out. Presenters have

an opportunity to demonstrate their

professionalism and sensitivity to 50+

needs and interests.

Creating a program opportunity

Senior centers, communities, civic

groups, community colleges, and

service organizations, to name a few, are always looking for programming

ideas and interesting speakers. Creating a program opportunity could be as

simple as contacting the organization’s leadership or administration and

offering to make a presentation on a real estate topic. But you don’t have to

wait to be invited as a guest speaker; you can schedule your own seminar.

Scheduling

Schedule the seminar during the daytime; midmorning, around 10 a.m., is

usually best. Remember, many older people cannot or do not like to drive

after dark. An early evening time frame may be okay if the attendees do not

have to drive to reach the location, such as a clubhouse or community

center.

Be sure to have a schedule established for a limited number of speakers.

Each speaker should be able to present their portion in 15–30-minute

increments; a maximum 1-hour time frame is best. Leave time at the end for

attendees to ask questions and gain additional information from the

presenters.

Publicity

Start publicizing the seminar about 6–8 weeks in advance. Take advantage

of free space in media, community bulletin boards, church bulletins, senior

center bulletin boards, public service announcements, and community

newsletters. In addition to inviting the club or community group members,

ask permission to invite prospects on your own contact list and encourage

Presenting a seminar enhances your reputation as a real estate

professional and also provides an opportunity for attendees to

check you out without making a commitment.


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other presenters to invite prospects from their contact lists. Invite

attendees to bring a friend.

Location, location, location

The presentation environment should not be sales focused; therefore,

holding the seminar in a real estate office is usually not a good idea. Instead,

choose a neutral, non-sales location, such as a community center, a public

library, or a community room. Look for a convenient location with ample

parking (and access to public transportation in metro areas) and easy

entrance with minimal stair climbing. When picking a date, check if there

are any other community events scheduled concurrently. If your market

area includes a large number of snowbirds, choose a time period when they

are in residence.

Attendance incentives

Think of attendance incentives in terms of encouraging or removing barriers

to attendance. What will attendees value? Items that encourage attendance

could include prize drawings, refreshments, credits toward services, dollars-

off coupons on partners’ products or services, or a free CMA. What barriers

might prevent attendance? Items that remove barriers to attendance could

include free or validated parking, a convenient location where likely

attendees gather anyway, a free breakfast or lunch, or an open invitation to

bring a friend.

If you are looking to build a future database, have the attendees fill out a

card with a few questions and an offer to win a gift certificate, such as $25

at a local grocery store or pharmacy.

Working with sponsors

Sponsors want to reach the same audience that you do and usually for the

same reasons—to gain customers. Sponsors help by sharing costs, providing

expertise as presenters, lending credibility, and offering promotion

assistance. Some sponsors, such as community groups, faith based

institutions, and senior centers, can offer a built-in audience, and you could

gain a reputation as a knowledgeable and trusted real estate advisor for the

sponsor.

A good approach to asking for a sponsor’s support is to start with your

personal contact at the company or organization. If you don’t have a

personal contact, consider asking your broker for help—borrow a contact.

When you make the call or meet with the person, you could say, “I’m

planning a real estate seminar and I expect 20–25 potential clients will be

there. Would you like to partner?” The response will likely be a question

about what partnering involves, so be prepared with specifics, such as

provide meeting space, make a presentation, help with promotion, offer

financial assistance, sponsor refreshments, or provide door prizes. Describe

how the sponsor can benefit from partnering with you and reach the target


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audience. Send a friendly note to confirm the sponsors’ support and specify

what they have agreed to do. Be sure to integrate your sponsors' important

deadlines and target dates into your planning timeline.

Working with other presenters

You could ask two or three representatives of your team, such as a lender,

attorney, tax specialist, accountant, or financial planner, to make a

presentation. Presentations by other professionals enhance your standing

as a real estate expert. As a rule of thumb, the number of speakers should

not exceed four, including yourself. Work out in advance the order in which

presenters will speak and each speaker’s time allotment. On the day of

presentation, you can act as the emcee, introducing the other speakers, as

well as making a presentation yourself.

Conferring in advance about topics avoids duplication and contradictory

information. Ask to see other presenters’ handout material in advance; this

will help ensure that the material is appropriate, and examples are relevant.

Keep in mind what your intent is; for instance, when speaking at a senior

community, you wouldn’t want to pair up with a company specializing in in-

home care as this is antithetical to the purpose for which you are speaking.

It’s also a good idea to make sure the other presenters understand the

distinction between a REALTOR® and a licensed real estate professional as

well as the significance of the SRES® designation.

Who is the audience?

Consider who will be in the audience and who needs the information. The

target audience could be the adult children of elders. Any of the topics that

you would present to elders can be refocused to address adult children. For

example, “Helping Your Parents Downsize” or “Is a Reverse Mortgage the

Best Choice for your Parents?”

What to talk about

Think about your target audience’s concerns; what problems do they need

to solve? For example:

Winterizing your home

Easy-maintenance landscaping ideas

Downsizing strategies to lessen physical burdens

Snowbirds—preparing your home of a long seasonal absence

Adapting your home for aging in place

Strategies and services for staying in your own home

FAQs on reverse mortgages

Fears and the emotional impacts of change


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It is crucial to establish trust with the target audience. You can do so by

stressing to presenters and sponsors that the purpose of the program is to

provide information, not a sales pitch. Audience members will immediately

tune out if they perceive that a presenter is trying to promote a company’s

services or products. Assure presenters that their expertise and willingness

to provide objective information will speak more loudly and lastingly than

any sales pitch and result in future customers.

Follow-up

On the day of the seminar, offer a sign-in sheet or sign-in cards. Ask for

contact information, including an email address; put check-off boxes on the

sign-in card for permission to email or call. Use the sign-in cards to draw for

door prizes. Offer a coupon for follow-up service, like a free CMA, a

consultation on preparing a home to sell, or some other service.

Although the seminar environment should not be sales focused, following

up on contacts made at seminars provides an opportunity for you to

demonstrate your expertise and offer helpful services. Because attendees

have already seen your presentation, and perhaps talked one-on-one, you

have accomplished the first step in establishing a relationship.


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3-MINUTE BRAINSTORMING CHALLENGE

Topics

What topics would be interesting for

mature adults and their families,

baby boomers?

Sponsors

What businesses and services want

to reach the same prospects?

Presenters

who could you invite to as a

presenter?

Giveaways

What information and items would

be memorable giveaways?

1-Minute Lightning Round: Do’s and Don’ts

Write one do and one don’t—in 10 words or less—for presenting seminars to

the 50+ market.

Do:

Don’t:


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YOUR DIGITAL PRESENCE When someone enters your site, do they know that you focus on the older-adult

market? What does your website say? What information does it offer? Post

articles about senior issues written by you, information about topics of interest

(e.g., information about the uses of reverse mortgages, etc.), and add links to

other websites such as community elder services or local pharmacies that

participate in the Medicare drug plans. Be sure to obtain permission to link to

other sites, and check these links from time to time, about every 4–6 weeks, to

make sure the links are still valid. Some other ideas are:

List your special services to assist mature adult buyers.

Post a call to action—“call me for information about.”

Post photographs of events and parties and send an email to your contact

list with a link to the photos.

Include your website address and a link in all email communications.

Feature a building or service of the month.

Post explanations of the Housing for Older Persons Act.

Post lists of stores, restaurants, entertainment venues, and services that

offer senior discounts.

Make your website a portal for information

about the community.

Provide links to elder services like

Medicare drug plans and

downsizing services.

Exam Question 44


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What features would make a website, Facebook page, or blog

attractive for the 50+ market?


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SRES® Marketing Support: Exclusively for SRES® Designees at www.seniorsrealestate.com

Customize this trifold brochure with

your contact information.

Customizable posters

Customizable postcards—4 versions in 2 sizes

Banner ads for your website

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As we learned in the previous chapters, most in the 50+ age group are currently

homeowners, and their housing needs and preferences will change as they

retire and grow older. As needs and preferences change, many will sell and buy

several times. Whether downsizing, pursuing a new lifestyle, or moving to a last

home, each of the transitions has different issues and service needs. As 50+

clients move through life phases, the real estate professional has an opportunity

to gain a series of sell and buy transactions. How can the real estate

professional continue to benefit from this stream of transactions? In the

previous chapters we looked at methods for reaching out to prospects and

building relationships. In this chapter, we’ll look at providing the services and

demonstrating the sensitivities that win client loyalty and referrals.

In preceding chapters we examined the motivations for making a transition as

well some of the obstacles that stop older homeowners from making a move.

The material that follows focuses mainly on overcoming obstacles because

these present some of the most challenging situations for real estate

professionals working with mature clients and their families. But it’s important

to realize that not every 50+ seller or buyer, even those advanced in years, is

apprehensive about making a transition.

PROVIDING ASSURANCE Thinking back to the discussion of obstacles that keep people from making a

move, perhaps the most important thing a real estate professional can do for an

apprehensive client is to provide assurance:

Assure the client, family, and caregiver that whatever the concern or worry,

others have faced similar situations, completed the transaction, and made a

successful transition.

Describe how others have solved problems, overcome obstacles, and made

a successful transition.

Provide information on your resource team and the services that are

available to assist in the transition.

Describe your business philosophy and experience as well as your skills and

services.

What other ways can you think of to reassure an apprehensive client?


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CASE STUDY: ON THE GO

Richard and Norma are making the most of their retirement years. Richard plays golf a couple of times a week, builds furniture in his woodworking shop, volunteers at a local hospital, delivers meals on wheels, and keeps in touch by email with a large network of friends. Norma enjoys trying new recipes, painting and crafts, tending her herb garden, and socializing

with a “Red Hat” group. Together they love to travel, attend theater performances and sporting events, and entertain friends. Their travels include trips to visit family and vacations with the grandchildren at beach resorts and Disneyworld. Their longtime home, near Cleveland, is spacious but also chock-full of a lifetime of accumulated stuff including their children’s childhood memorabilia. Photos documenting family celebrations and accomplishments cover every inch of wall space. Richard and Norma have always dreamed of living in a warm climate and they both agree that a smaller home with fewer maintenance demands would be best; they really want to be able to “lock the door and leave” without worry. They asked their real estate professional, Adele, to talk with them about selling their current home and relocating to an active community in a warmer climate. Norma confided to Adele that sorting through all the stuff and deciding what to move, keep, discard, or give to the kids was almost overwhelming.

What are the issues involved with this case study? Do Richard and Norma seem

apprehensive? What could you do to help them make the transition?


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THE FORD INTERVIEW

A distinguishing characteristic that makes your presentation memorable is the

way you go about building rapport. Small talk breaks the ice and helps prospects

get comfortable as you describe your services and brokerage relationships. If

the presentation is made in the client’s home, look for visual clues such as

photos, awards, paintings, embroidery, a piano, or sports equipment near the

door, for clues about their interests. A handy way to remember questions to ask

is the acronym FORD. You can ask about:

Family and friends

Occupation

Recreation and hobbies

Dreams and goals

It may be insensitive to ask retired or elderly clients about their occupations or

dreams, but almost everyone has a favorite pastime. Photos of family and

friends and mementos provide potential conversation starters too. Also, how

you ask is as important as what you ask.

During the conversation, you can learn important information such as the

client’s life stage, recent real estate experience, family involvement, and other

factors. Concerns with the transaction will surface, providing you an opportunity

to describe your services and special skills and knowledge.


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EXERCISE: FORD INTERVIEW Your instructor will divide the class into pairs. Working with your assigned

partner, take turns interviewing each other using the FORD model. First, one

person assumes the role of the prospect and the assigned partner assumes the

role of the agent; then switch roles. What are some questions that should be

asked during an interview with a mature adult buyer or seller? How could you

phrase sensitive questions to demonstrate interest without intrusion?

THE BIG QUESTIONS

The real estate professional may need to ask probing questions and interpret

answers to get at the true meaning of statements. For example, the statement

“I want a ranch house” may really mean a one-level property with no stairs. A

condo in an elevator building may meet this need with the added bonus of none

of the upkeep of a single-family home. A statement like “I’m not interested in a

senior community” may express a preference to be in a community with people

of all ages—children, families, middle-agers, and elders. Specialists report that it

is not unusual for a buyer to be precounseled on the Internet and come to the

counseling session with a list of needs, wants, and desired properties. Do not be

afraid of suggesting alternatives that might be suitable; the client may not be

aware of the options.

When working with mature adults it may be appropriate to ask questions and

raise issues that would not come up with younger clients. For example, if the

reason for selling is to enter a nursing home, Medicaid eligibility may be a

factor; assisted living or home health care may be a workable alternative.


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Questions might include:

Is this an interim or transitional move?

How does this purchase fit into future plans? Is it a second home that may

become a primary home in the future? A transition home to be sold at

retirement?

How do you feel about making this move?

What are the top 10 things you want, or never want, in a home?

Are there special needs or property features to consider?

Will the neighborhood meet your needs for transportation, grocery delivery,

meals, and medical?

Do you do your own housekeeping and gardening?

What form of communication do you prefer? Phone? Email?

Is there another family member involved in the decision?

Would you like to know more about the financial options available?

Do you currently have a reverse mortgage?

Will the move impact long-term health care coverage?

In the case of an estate, has the estate been probated?

Ask Yourself:

What are the concerns, priorities,

and time frame of these clients?

Why would the clients do

business with me?

How can I earn and maintain their

respect and trust?

How can I work best with the decision-making processes of the clients,

family members, or caregivers to produce a successful transaction?


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EXERCISE: THE REAL MEANING

What questions might you ask to probe the meaning behind these statements

and learn more about the client’s concerns?

My kids want me to rent a senior citizen apartment, but those are full of old

people.

I want my privacy.

I want a house where we can lock the door and go!

There are so many memories in this old house—it’s hard to leave those

behind.

My sister-in-law moved into one of those senior communities and she just

loves it. It might be right for me.

Some stairs are okay, but not too many.

What do people do there to keep busy?

My wife is really into crafts, so we need a room just for her craft projects.

Will that development let my grandchildren stay for a visit?

My kids want me to sell this big old house and move to something smaller.

What do you think?

If my husband was still here, he’d know just what to do. I’m not so sure.

UNDERSTANDING NEEDS AND CAPABILITIES Specialists attest that it is helpful to profile clients by where they fall on a

maturity and activity continuum.48 Although chronological age provides a clue to

an individual’s needs and capabilities, it doesn’t tell the whole story. As noted in

the discussion of understanding how we age (see page 28), functional age—

cognition, mobility, impairments, chronic conditions—matters more than the

number of years in determining needs, wants, and abilities. Although when a

major or sudden life change necessitates a change in living arrangements, the

emotional impact can be as debilitating and limiting as a physical illness. The

real estate professional must remember that working with the 50+ market,

especially the very elderly, requires sensitivity and empathy. You can create

your own needs and wants tool based on the checklist on page 60. Develop this

checklist for your own market area and use it to find out needs, wants, and

priorities as well as activity level.

48 Remember that the Fair Housing Act prohibits discrimination on the basis of handicap; do not try to decide what is appropriate for disabled clients—they should decide.


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VIEWING AND SHOWING PROPERTIES

Viewing Properties

Realize that elders may not have the physical and mental stamina for a full day

of property viewing or a lengthy counseling session. It may be best to schedule

several short appointments instead of one long one.

Memorabilia Everywhere!

Mature adults’ homes often wind up as repositories for a lifetime of family

memorabilia and bric-a-brac. Every item recalls a cherished memory and the

senior owner knows where everything is. But real estate professionals know

that a house packed with too much clutter will not show well. A prospective

buyer will have a hard time looking past the clutter of all those memories. What

can a real estate professional do?

Tact and patience are essential when advising an elderly seller on how to stage

the property for showing. The sale of a long-owned home is an unsettling

experience on its own without adding the upset of disturbing or removing

objects that represent the homeowner’s memories. Therefore, it may be

necessary to show the home a couple of times in its cluttered state before the

owner can see the benefit of packing some things away. You could say, “The

house might show better if some things were packed and stored.” Or, “Would it

be a good idea if we started packing some of your things?” Or, “I’m concerned

about your… collection and about breakage when showing the house. Would it

be okay to pack some of the collection?”

As-Is Properties

An as-is property can need a lot of repairs. A home that has been lived in for

many years may have deferred maintenance issues. The owners may not have

the ability, financial resources, or motivation to keep the property up. Or, they

may not be aware of or see the need for repairs or maintenance. They are just

trying to live out their life in the home without investing any more in it. In some

cases, even an as-is property may need repairs before it is ready for sale. A

home equity loan to pay for repairs may be a solution; the loan balance can be

paid off with the sale proceeds. If the owners want to stay in the home but lack

the money to repair it, a reverse mortgage may be the answer.

Showing a Property with the Homeowner Present

It may be difficult for an elderly or mobility-impaired homeowner to leave a

property for showings. The real estate professional may have to go the extra

step of finding a place, like a neighbor, for the homeowner to go during

showings. On the other hand, some experienced specialists say that homes can

be shown with the homeowner present. A notation in the MLS remarks (such as


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“seller may be present at time of showing”) alerts other agents that the

homeowner may be present when they plan to show the property. The

practitioner can reassure the homeowner that the home and their personal

property will be safe during showings; it may help if a family member or

colleague remains with the elder during the showing to provide emotional

support and report progress.

SENSITIVITIES

Patience

When asked about working with mature and elderly clients, experienced real

estate professionals say have patience, patience, patience and expect more

handholding through the entire process. Decisions can take a long time and

lengthen the sales cycle. If an elderly client has a physical condition like short-

term memory loss or hearing or vision impairment, it may be necessary to

repeat information and divide explanations of complex processes into smaller

steps. Matters such as disclosures and inspections can cause a lot of confusion

and misunderstanding too. Focus on counseling the client, not selling; a hard

sales approach could be perceived as taking advantage of an elderly person

even if your advice is the right course of action.

Empathy

The client may be suffering a great deal of emotional distress, such as grieving

the loss of a spouse, friends, or family members, or even a beloved pet. A

change in health can impair hearing, eyesight, cognitive ability, or mobility and

learning to deal with a sudden loss of ability involves a similar mourning

process. Even moving out of a long-owned home can involve a mourning

process as personal attachments to people, places, and things are severed. The

loss of a spouse or life companion is particularly devastating. A couple may have

bought the house together and spent a lifetime making it their home, but now

the survivor must sell the house on his or her own. The financial or household

decision maker may be gone, leaving the survivor uncertain of what to do or

how to accomplish even everyday tasks.

Communications

What should a real estate professional do when an elderly client calls every day

or several times a day? You should respond with patience and remember the

Golden Rule. Understand that the elderly client may not have anything else to

occupy time and the real estate transaction is likely causing stress and worry.

Experienced specialists handle this situation by managing expectations, such as

setting a date and time for the next phone call to the client. If you will be out of

town, change your voice mail message every day so callers know where you are,

when you will return, and when you will return phone calls.


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On the other hand, keeping in touch with active mature adults who are

constantly on the go can present some challenges for the real estate

practitioner. Retirees may leave on a spur-of-the-moment trip and not inform

the real estate professional that they are leaving or provide contact information.

Retirees do not have to worry about scheduling time off from a job. They are

free to go when they please and do not feel a sense of urgency about business

matters.

Although attitudes are changing as tech-savvy baby boomers move into

retirement years, some elders do not use mobile phones, voice mail, or email.

Ask if the client uses email or has a smart phone. Be aware that many seniors

turn on mobile phones only when they want to make a call.

Have the seller provide a point of contact who can to reach them if you are unable to do so. Although rare, you may also consider providing a prepaid mobile phone to a client who does not have one so that they can call you or receive a call directly from you. Make sure the device is simple to operate, such as one-button play back. Do not call too late in the evening (after 9:00 pm); many elders are early to bed and early to rise.

Documents

Large-print copies of documents are a great help. Even mature adults without

obvious vision problems appreciate documents with large print. A quick way to

make a large-print version of a document is a photocopy enlargement; keep a

stock of 11x17 paper in your office for photocopying enlargements. The clients

can sign the small-print version of documents. If you are working with a couple

or family members, prepare extra copies of everything so each person can have

a copy. Develop a large-print version of your business card, too. You can also

keep a magnifying glass or page-size magnifier handy in your desk and car. A

penlight provides extra illumination and can sharpen focus.

Comforts

An office setting that is comfortable for mature adults will also be comfortable

and inviting for younger clients and customers. Chairs with arms are easier to

stand up from. Low couches and easy chairs can present problems. Refer to the

universal design standards on page 62 and evaluate your office setting in

relation to those principles.

Closing

Mature clients expect the real estate professional to be present at closing as a

support and to explain what is going on. It may be necessary to go the extra step

of driving the client to the bank and the closing.

Another option is pre-signing. In most instances, the real estate professional,

the seller, and a representative from the title company will meet at the new


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home of the senior to complete the pre-signing for the property. The seller will

then provide the necessary funds via a deposit slip to the closer, a check for the

real estate professional to deliver, or wired means. Providing this option enables

your senior client the ability to avoid traffic and other obstacles the day of

closing.

Senior specialists say that this little bit of extra service may mean the difference

in keeping the client because the future business is lost if the practitioner is not

at the closing.

Low Vision Assistance

Low vision is more common than blindness and less obvious to the observer.

Glaucoma, cataracts, and macular degeneration are leading causes of low

vision. You can help clients who have low vision by:

Announcing your presence and identifying who you are.

Describing what you are doing.

Uncluttering the area.

Putting objects back in place if you move something in the home.

Speaking directly to the person but not yelling because low vision has

nothing to do with hearing.

Offering assistance but not insisting.

Providing low vision aids, like a magnifying lens or page magnifier.

Knowing how to be a sighted guide; offer your arm, walk a half step

ahead so your movements can be sensed, and speak up when

approaching stairs or curbs. Never grasp or push the person in front of

you.


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Case Study: Gordon and Juanita

Ten years ago, Gordon and Juanita purchased a one-bedroom condominium

in a senior development along Florida’s Gulf coastline and settled in to enjoy

winters in Florida. A couple of years later, they purchased a second larger

condo in the same building with the expectation of flipping it and using the

gain to pay off the mortgage on the one-bedroom unit. The second condo is

currently listed with a real estate professional. Things have not worked out as

they had planned. When Gordon and Juanita purchased the second condo,

there were only two other units available in the building; now there are 26

units listed, property values have fallen, and it is a buyer’s market. Then

Juanita passed away suddenly. Now Gordon is left with carrying costs and

mortgage payments on three properties, including the family home in

Philadelphia, which he would never consider selling. Gordon, in his grief, is

confused, lost, and completely distraught, and he has been calling his listing

agent two or three times a day to ask for advice. Gordon’s two daughters,

who live in the Philadelphia area, have not been involved in the parents’ real

estate dealings or financial affairs until now, but they are very supportive of

their father and want what is best for him. What are the issues involved in

this scenario? If you were Gordon’s real estate professional, what would you

suggest?


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INVOLVING FAMILY MEMBERS

Involving family members or people who are like family can be a big help for

both the client and the real estate professional, especially when a client’s

physical and cognitive capabilities are weakened. A family member can interpret

information, locate and keep important documents, meet deadlines, confirm

appointments, and help the elder through the transition. Refer to the earlier

discussions of handling confidential information (page 147) and power of

attorney (page 149). Remember that the real estate professional must obtain

permission from the client before sharing confidential information, even with

family members, and should verify that family members have authority to make

decisions.

If other family members are involved in decision making, it is important to build

relationships with them too. Include family members in discussions and

decisions if appropriate and if the client wants to include them. If children live in

another city, schedule a conference call with them and the elder parent. You

can make them part of the team that is able to communicate and help elders

make decisions and take actions. With the client’s permission, help family

members by having extra copies of documents available.

Staying Out of Family Conflicts

When an elder’s property is involved in a transaction, specialists report that

adult children often make the first contact with the real estate professional to

request a CMA or view properties. Of course, in many cases the adult child is

acting with the knowledge and consent of the elderly parent. In other situations,

this initial contact can signal the beginning of an entanglement in a difficult

family situation.

It’s important to realize that, even with the best of intentions, family members

can have different goals. For example, an elderly homeowner may be most

concerned about maintaining independence and privacy while the children are

concerned about the parent’s safety. Family members react differently too. A

mature homeowner may be looking forward to freedom from home

maintenance, but the children resist the sale of a family home because it breaks

an emotional link to cherished childhood memories. When one sibling takes the

lead, old rivalries can resurface. In all these instances, the signals may be quite

subtle and unspoken.

What should the real estate professional do to provide services without being

drawn into family business?

Stay focused on the transaction and the client

It is important to be aware of sensitivities but remember that it is a business

transaction. Keep interactions with the senior and family members on a

professional basis by explaining the transaction process and managing


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expectations. Be prepared for closing delays if families are working through

conflicts.

Be professionally friendly

It is easy to be drawn in with elders who need emotional support or

someone to talk to. The extent of the relationship may be greater with an

elderly person than with younger and more active individuals. Be

professionally friendly but not the best friend. Also, be careful when

accepting gifts from elderly clients; it may be perceived by the families as

taking what is rightfully theirs.

Case Study: A New Home for Dad

Raymond, an elderly father of three sons, owned a house and an adjoining

property next to a growing subdivision. After suffering a bad fall at home, he

agreed with his three sons that it would be better to live closer to one of

them. They asked a broker to list the properties. A builder made an offer of

an amount of cash plus construction of a new home for Raymond on the

oldest son’s land in trade for the father’s properties. It seemed like a good

solution; Raymond would live next door to the oldest son in a new home.

However, a family squabble arose when the two younger brothers realized

that the older brother’s property value would be increased by the

construction of the new home. Now, the younger brothers are putting

pressure on their father to stall the deal because they see the older brother

benefiting more. The oldest brother has stated that he does not expect to get

anything out of the deal and, besides, he is the one who has always taken

responsibility for looking after their father. Raymond is suffering from the

stress of conflict between his sons. He thinks the solution might be to just sell

his property and move into a senior-living apartment. In the last voice mail

message left with the broker, the builder said he needs an answer soon or the

offer is off the table. What are the issues involved in this situation? How

would you handle the situation?


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RECOGNIZING ELDER ABUSE AND NEGLECT

Elder abuse and neglect is a sad reality. The National Center on Elder Abuse

(www.ncea.aoa.gov) estimates that up to two million elderly people are victims

of abuse, neglect, exploitation, or mistreatment by someone, such as a

caregiver, spouse, partner, or an adult child. For every case of reported abuse,

about five more cases go unreported. The abuse, which usually happens in the

home, can be physical, emotional, or psychological harm, neglect (intentional or

unintentional), or financial exploitation. Warning signs are:

Threats of force, exposure to weather, inappropriate use of drugs, food

deprivation, abandonment

Verbal or nonverbal acts that inflict mental pain, fear, anguish, breaking or

stealing treasured objects, ignoring the elder, humiliation

Inadequate water, delayed medical treatment, lack of assistance with

eating, not attending to personal cleanliness needs

Withholding basic emotional support, respect, or love, ignoring calls for

help, lack of assistance in helping the elder do things he or she likes and

requests to do

Self-neglect, ignoring personal hygiene, oblivious to weather, compulsive

hoarding

Sexual contact without the elder’s consent

Financial exploitation, taking, misuse, or concealment of funds, property, or

assets

Health care fraud, under medicating, overcharging, kickbacks for referrals,

or substituting less expensive medications

Strained or tense relationships, frequent arguments between the caregiver

and elderly person

Sudden changes in behavior or financial situation, injuries, and bruising

If you suspect abuse, report it to the appropriate authority. HelpGuide.org

(https://www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm)

provides a detailed listing of elder abuse warning signs. Print out the list of

warning signs and put it away in the trunk of your car or an office file, along with

the elder abuse hotline numbers in your state (all states have a reporting agency

for domestic or institutional abuse) or area. You will have an easy reference

when your eyes, ears, or instincts tell you that something does not seem right.

https://www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm


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SCHEMES AND SCAMS

Perpetrators of scams and high-pressure sales operations often target the

vulnerable elderly. Real estate professionals can help by alerting clients of scams

and speaking up when they suspect someone is at risk.

Cash As-Is

Seniors may receive a cash as-is offer from an investor. Many times, these

types of investors will offer around 30 cents on the dollar of a given

property value. While it may be tempting for the seller to accept an all-cash

offer, it's often not the best option available.

Deed Scams

Seniors whose properties are owned free and clear may be susceptible to a

form of deed scam. A fraudulent deed is filed, and the home is sold without

the senior owner’s knowledge.

Cons

A con artist may try to persuade a senior to withdraw money from an

account in order to prove that a bank teller is stealing money from

depositors. Another scam involves asking for bank account numbers and

personal information by phone in order to verify information.

High-Pressure Sales

Boiler-room operations that sell living trusts frequently target the elderly.

The purchaser pays several hundred dollars or more for a package of

preprinted forms. High-pressure sales of home refinancing charge hefty

service fees for unnecessary home loans.

Phony Home Repairs

Con artists often appear after natural disasters like hurricanes. They pose as

contractors and offer home repairs at bargain rates. The repairs are poor

quality or never finished, and the contractors disappear with money paid in

advance.

Fraudulent Mortgage Notices

A sales pitch for refinancing or other products masquerades as an official

document stating, “call for important information about your mortgage

payment.” Another scheme is a phony official notice that a mortgage has

been transferred and future payments should be sent to a fraudulent lender

at a new address.

Wire Fraud

The victim receives an urgent email impersonating the real estate

professional or some other person involved in the transaction. The email

appears legitimate and instructs the recipient to quickly wire funds to the

scammer’s bank account in order to secure the transaction. In most cases,


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by the time the fraud is discovered, the scammers have withdrawn the

wired funds and closed the account.

Social Security Scams

You can help clients and customers be on the lookout for these scams that start

with contact—phone, letter, or email—from a scammer claiming to be a Social

Security Administration employee.

Phony Cost-of-Living Adjustment

Victims are informed that the Social Security Administration has noticed

that they have not applied for the annual cost-of-living benefit adjustment.

The “helpful” reminder warns that they must act fast to meet the

application deadline and offers an application form or directs victims to a

phony website which collects bank account and identification information.

Social Security Card Suspended for Suspicion Activity

The victim is informed that the Social Security Administration fraud-

detecting computer system has detected suspicious activity on the victim’s

account. The scammer asks if the victim recently rerouted payments to a

bank in a different state. The scammer says the problem can be fixed if the

victim acts quickly and provides bank account information and other

identification information.

Phony Computer System Hack

A phone call informs the victim that the Social Security computer system

has been hacked and the victim must provide bank account and

identification information so that the Administration can identify

compromised accounts. The scammer knowingly supplies misinformation,

which the victim is then asked to correct.

Out-of-Date Paper Social Security Card

The scammer informs the victim that no further benefits can be paid until

the victim’s old paper Social Security card is replaced with a new, chip-

enabled card. The scammer offers to expedite replacement if the victim

provides identification information including Social Security number.

DATA SECURITY PLANNING

Real estate professionals often collect a lot of personal information about

clients and customers in the course of finding the right home. In this age of

digital recordkeeping, your office policies should include standards and

procedures for collecting, sharing, destroying, and protecting customer and

client information.


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The Federal Trade Commission recommends five key principles for a sound

data security program:

1. Take stock: Know what personal information is in office files and computers and who has access.

2. Scale down: Keep only what is needed for business.

3. Pitch it: Properly dispose of information that is no longer needed.

4. Lock it: Protect the information that is kept.

5. Plan ahead: Create a plan to respond to security breaches.

NAR offers a free Data Security and Privacy Toolkit to educate real estate agents and brokers, associations, and MLSs about data security issues. Download a copy at www.nar.realtor/data-privacy-security/nars-data-security-and-privacy-toolkit. As part of the ePro® Certification program, NAR offers a one-day classroom course on data privacy and security, Data Privacy: Protecting your Clients and Your Business.

EMOTIONAL IMPACT ON THE REAL ESTATE PROFESSIONAL

Specialists sometimes find that they have become best friends for the elderly

clients who rely on them for advice. Numerous phone calls for a variety of

reasons can draw the real estate professional into personal involvement. If a

senior is not in touch with family, the real estate professional may be the only

dependable person they know. Extra care is needed to balance customer service

with agency obligations if the elder is not the client. Elderly buyers and sellers

almost always think of the real estate professional as their agent, regardless of

the agency relationship. Protective instincts can lead to treating the elderly like

children. Specialists warn that when this happens personal involvement is

beyond the bounds of a business transaction.


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BUILDING YOUR TEAM

Access to a team of experts who can provide expert advice is a valuable asset

for real estate professionals who want to specialize in the mature adult market.

Not only do you and your clients have access to valuable knowledge and

services, other professionals may refer business to you. It’s a fact that one of

the best ways to extend your own network is to become part of others’

networks. Social networks like Facebook and LinkedIn make it easier than ever

to maintain and grow network connections. As mentioned in previous chapters,

your older clients may not use social media, but younger family members

probably do. In this chapter, we’ll look at the other professionals you may need

on your team including some services that may be new to you. We’ll also look at

how to select team members who are sensitive to working with mature adults

and in sync with your service philosophy.

Who Should Be on Your Team

The team should include experts who provide solutions to the challenges and

issues involved in making a major life transition and aging. Some roles are

obvious, like an elder attorney, housekeepers, or meals on wheels. But others

involve services that are perhaps not as well known, like pet placement, art and

antique appraisal, or senior concierge, to practitioners who do not specialize in

the 50+ market. A checklist of possible team members appears on page 205.

Vetting Potential Team Members

Team members should share your mindset and sensitivities toward providing

services for mature adult clients. Some specialists recommend personal

interviews with potential team members to gain a sense of their helpfulness and

respect for mature adults.

Look Around Your Community

Spend time learning about what your community has to offer. Use the checklist

on page 60 to help research services. Specialists advise that you keep an open

mind, especially if you are not a mature adult yourself, and look at your

community through the eyes of an older person.


206

The Seniors Real Estate Specialist® Team

Property Legal and Financial Personal

Termite inspector

Painter

Landscaper and

gardener

Pool service

Snow removal

Home inspection

Emergency board-

up

Disaster preparation

and recovery

Mover

Handyman

Electrician

House sitter

Certified Aging in

Place Specialist

Clutter reduction

expert

Interior decorator

Interior staging

specialist

Storage facilities

Housekeeping

service

• Charities that

accept donations of

furniture, clothing,

and household

items

Home warranty

service

Elder law attorney

(wills, trusts,

estates)

CPA or money

manager

Financial planner,

expert on pensions,

IRAs, 401(k)

accounts, etc.

Estate liquidator

Escrow company

Title company

1031 exchange

specialist (qualified

intermediary)

Tax specialist

Reverse mortgage

lender

Reverse mortgage

counselor

Insurance agent

Document

shredding

Home health care

agency

Community service

contacts

Transitional services

contact/coach

Grief counselor

Elder abuse

resources

Ombudsman

Hospitals and clinics

Public benefits

office

Health care facilities

and levels of care

Community

resources

Meals on Wheels

PACE program

Veterinarian for pet

care

Pet boarding

Dog walker

Pet adoption

Auto repair and

donations

Transportation

services

Volunteer

opportunities and

services

Estate sale

organizer

Art and antique

appraiser


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MORE SERVICES

Senior moving managers

These professionals specialize in assisting older adults and their families

with the emotional and physical aspects of relocation. For information and a

moving manager locator, go to the National Association of Senior Move

Managers at www.nasmm.org.

Senior concierge services

These service providers help mature adults maintain independence by

offering a range of nonmedical personal assistance from running errands to

providing transportation to medical appointments to participating in

recreational activities. Some offer transitional services to facilitate the move

between treatment and care facilities. Search the web for elder concierge

services in your area.

Junk removal

When accumulation or hoarding has overwhelmed a property or

homeowner a junk removal specialist may be the answer. These service

providers specialize in junk removal from properties like homes, garages,

and storage lockers. Some also remove junk autos. Search the web for junk

removal specialists in your area.

Pet placement

Pet placement services specialize in rehoming pets, including senior dogs

and cats, and can help a pet owner through the difficult decision to

euthanize an ill dog or cat. Search on the Internet for pet placement

services.

Foster care

Adult foster homes are private homes with family-style living, offering room,

board, and round-the-clock physical care.

Adult day care

Adult day care centers provide social and some health services for adults

who need supervised care in a safe place outside the home during the day.

They can also afford a respite for caregivers. For information on services,

visit the National Adult Day Services Association website at www.nadsa.org.

Driver rehab

Occupational therapists who specialize in driver education can assist in

restoring driving skills and evaluating the road-worthiness of elder drivers.

Go to the website for the American Occupational Therapy Association at

www.aota.org/older-driver or the Institute for Mobility, Activity, and

Participation at http://driving.phhp.ufl.edu.



208

Medical equipment loan

These community-based services loan basic medical equipment, such as

wheelchairs, walkers, crutches, canes, and bathroom safety items. Search

the web for the closest medical equipment loan service.

Volunteer matching

Volunteer match services connect people who want to offer their time and

talent with organizations who need assistance. Go to Volunteer Match at

www.volunteermatch.org or search the Web for local volunteer matching

services.

Energy and utility assistance

Many communities offer utility payment assistance for low-income seniors.

Search the web for senior utility assistance.

Bill payment and checkbook balancing

Many community-based organizations and senior centers offer this service.

Senior dating and companion match-up

A search on the Web for senior dating provides a long list of services that

specialize in matching up seniors for companionship, travel partners, or

romance. Some of the largest services are AgeMatch.com,

SeniorFriendFinder.com, and SeniorMatch.com.

Employment services for older workers

These services specialize in matching older workers with job opportunities

and help employers tap the 50+ talent pool. Go to RetiredBrains.com or

SeniorJobBank.org.

Finding an Elder Law Attorney

All state bar associations maintain websites through which attorneys may be

located. Go to the website for your state; find the website by typing [state] bar

association in the browser’s search bar. Look for specialists in particular areas,

such as senior, elder, living will, advance directives, durable power of attorney,

or estate planning.

ORGANIZING A RESOURCE FILE

Start compiling an information file of resources and services. This file can be a

marketing distinction and an offer an edge on your competition. Use the

following suggestions on categories of resources to start researching and

building your customized resource bank.

Active adult developments:

Develop an information sheet for each facility with amenities, range of


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housing options, age restrictions, association fees, homeowners association

contact, building manager, and association rules.

Senior apartments, congregate living, and care facilities:

Consider developing a summary sheet for each facility. Include notes on

contacts, levels of care, costs, range of housing options, availability of short-

term stays, age restrictions, and other information.

Health facilities, hospitals, clinics, and rehabilitation facilities:

List facilities with phone numbers and addresses.

Home health care:

Provide contacts for hiring home health care workers.

Specialists:

List area specialists in cardiology, ophthalmology, gerontology,

rheumatology, orthopedics, neurology, chiropractic, and other specialties.

Personal care:

List hair stylists and manicurists who provide in-home service.

Medicare drug plan participating pharmacies:

Contacts for local participating pharmacies.

Cultural and entertainment venues:

List theaters, cinemas, concert venues, art galleries, and museums.

Libraries and bookstores:

List reading clubs and discussion groups.

Houses of worship:

List churches, temples, mosques, and clergy contacts.

Educational opportunities:

List senior-friendly learning environments, community colleges, university

extensions, and lifelong-learner programs.

Aging-support organizations:

List local offices that provide support services for elderly.

Magazines and newsletters:

Provide sample copies of magazines and newsletters targeted to senior

readers.

Travel clubs:

List travel agents that specialize in senior travel—group travel is an excellent

way for seniors to get acquainted and make friends.


210

Banks, mortgage lenders, and mortgage counselors:

Provide information on financial and lending institutions, reverse mortgage

lenders, and counseling services.

Volunteer opportunities:

Provide information on volunteer involvement opportunities.

Employment (paid) opportunities:

Provide information on area employers who hire seniors.

Clubs and hobby groups:

List activities for seniors to enjoy on their own and with younger family

members.

Advocacy groups:

List environmental, political, and issue-oriented groups.

Support groups:

List support groups for the bereaved, caregivers, and others.

Community events:

Provide information on community special events, observances, and annual

events.

Restaurants:

List restaurants that offer senior hours, prices, and portions as well as easy

access and comfortable seating and atmosphere.

Supermarkets and pharmacies with delivery services:

Include retail outlets that offer senior discounts and services.

Auto care:

List car dealerships, repair garages, and tow service.

Trends:

Provide information organized by dates or headings, such as local and

national issues.


211

MAKING PRUDENT REFERRALS TO EXPERTS

By: Nan Roytberg


Reprinted with permission from Today’s Buyer’s Rep, Real Estate Buyer’s Agent Council.

You’re an expert on real estate. But you can’t be an expert on every aspect of

real estate. You can’t know whether there’s mold behind the walls, whether the

roof will last another ten years, whether the well water is potable. And trying to

finesse these questions will quickly get you in big trouble, legal trouble. So just

as discretion is the better part of valor, so too is knowing when to say, “I don’t

know, but I can give you the names of some experts” is an important part of

avoiding legal liability. You also can’t do everything your buyer wants and needs.

And as much as you may want to go the extra mile to complete the sale, you

can’t promise to paint the house, renovate the kitchen, repair the furnace and

provide financing. You can, however, help your buyer find the right people to

take on those jobs.

Buyers often expect that you’ll know who to contact to get certain services, and

it’s always nice to anticipate their needs by having a written referral list of

experts they may need, such as:

Lenders

Home inspectors, both general and those who specialize in lead-based

paint, radon, termites, mold

Structural engineers

Painters, plumbers, electricians and carpenters

Attorneys

Insurance providers

Cleaning services

However, you need to make sure that the people and companies on your list are

reputable, so that your referrals don’t come back to haunt you through buyer

dissatisfaction or, even worse, a lawsuit.

One way a licensee can land in court is to recommend only one expert in a

specific field who does an inadequate job. In 2000, a brokerage that

represented buyers in Kentucky was sued when the pest control company it had

recommended failed to perform satisfactorily. The buyers engaged a particular

pest control company, on the recommendation of the broker, to inspect and

treat the property for termites prior to the sale. After the closing, the buyers


212

discovered that their home was still infested with termites. They sued everyone

involved in the transaction, including the brokerage that represented them and,

of course, the pest control company. Fortunately, the broker had protected

itself by recommending two other pest control companies to the buyers. The

Kentucky appellate court thus affirmed the decision of the trial court that the

brokerage’s recommendation did not constitute a guarantee of performance.

The court held that the buyer brokerage was not liable for the pest control

company’s failure to provide satisfactory services.

So when making any recommendation, your standard procedure should be to

include contact information for at least three suggested experts for each

category on your referral list, being careful not to recommend any one expert

over the others. Still, you need to go further. Putting three names on a list is not

enough to keep you out of trouble. Take the time to find the right names to put

on your list. In other words, include only those experts with whom you have had

good experiences yourself or who come highly recommended by others you

trust.

You should also cover yourself a bit more by placing a clear, conspicuous

statement on your referral information that says you are providing the list

merely as a service to your buyers. Disclaim liability further by stating on the list

that neither you nor your firm is responsible for any referred expert’s

availability, reliability or performance. Also include a statement attesting to the

fact that you do not receive any referral fees or other compensation from the

experts on the list. Any lawful affiliations you or your firm may have with any of

the suggested individuals or companies need to be disclosed as well.

These are the basics that you should do, but there are some things—things that

your buyer-clients might want or expect you to do to help them get that house

ready—that you should not do. In a case the California Court of Appeals heard

just last year, a home inspector identified a number of repairs for a particular

property, including the replacement of a water heater. The broker, who was a

disclosed dual agent, went beyond just referring a handyman to do these

repairs. The broker actually selected and retained the handyman, paying him

out of the sellers’ escrow funds. The handyman replaced the water heater with

a natural gas heater instead of one compatible with propane, which was the fuel

that fired it. There was a subsequent fire and the buyer’s boyfriend suffered

lung damage from smoke inhalation. The broker hoped that the “buyer’s

inspection advisory” and an addendum to the purchase agreement would shield

him from liability. The advisory stated that the brokers didn’t guarantee the

performance of others. The addendum stated that representatives of the broker

might provide referrals to “firms dealing in related real estate services such as

title insurance, escrow, pest control, geological/physical property inspection,

home warranties, etc.,” but the use of these firms was at the sole discretion of

the buyer and/or seller. The addendum further stated that referrals by the

broker did not imply “any specific recommendation, or any warranty of any


213

firm’s expertise or professional licensing status.” In this case, however, the court

looked beyond the language of the advisory and addendum. The broker had

gone beyond making a mere referral to the buyer. The broker had voluntarily

undertaken the responsibility to oversee the repairs and had been negligent in

such oversight by failing to ensure that the handyman understood that a

propane water heater was necessary. The appellate court thus reversed

summary judgment for the brokers, saying that there was a genuine issue of

material fact as to whether their involvement established a duty of care beyond

the exculpatory clauses (clauses intended to shield the broker from legal

liability—to make him not culpable—for any negligence on the part of the

experts whom the broker referred) in the buyer’s inspection advisory and

addendum to the purchase contract.

This is perhaps another case of actions speaking louder than words, but it is

most certainly a warning: Unless you’ve been engaged to manage the property,

stick to just giving the buyer some good, reliable names. Do more and you may

need a referral yourself…a referral for an attorney!


214

Resources

215

Resources


216

Resources

217

WEBSITES Senior Real Estate Specialist (SRES®)

http://seniorsrealestate.com

Senior Real Estate Specialist, Resources for 50+ Real Estate

www.sres.org


www.nar.realtor

NAR Research and Statistics

www.nar.realtor/ research-and-statistics

AARP

www.aarp.org

American Community Survey, U.S. Census Bureau

www.census.gov/programs-surveys/acs

American Occupational Therapy Association

www.aota.org



Center for Universal Design, College of Design, North Carolina State University

https://design.ncsu.edu

Certified Relocation and Transition Specialist

www.crtscertification.com



www.carf.org

Eldercare Locator

www.eldercare.gov


www.agingstats.gov


www.agingstats.gov

HelpGuide.org

www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm

http://seniorsrealestate.com/


http://www.nar.realtor/

www.nar.realtor/%20research-and-statistics

http://www.aarp.org/

http://www.census.gov/programs-surveys/acs

http://www.aota.org/


https://design.ncsu.edu/

http://www.crtscertification.com/


http://www.eldercare.gov/



http://www.helpguide.org/articles/abuse/elder-abuse-and-neglect.htm


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HUD Certified HECM Counselors


HUD Home Equity Conversion Mortgage Webpage

www.hud.gov/program_offices/housing/sfh/hecm/hecmabou

Institute for Mobility, Activity, and Participation

http://driving.phhp.ufl.edu

Justice in Aging

www.nsclc.org

Leading Age

www.leadingage.org

LGBT housing protections by local community or state

www.lgbtmap.org/equality-maps/non_discrimination_laws

Medicaid Planner

www.medicaidplanningassistance.org/find-a-medicaid-planner

National Aging in Place Council

www.ageinplace.org

National Association of Senior Move Managers

www.nasmm.org

National Center on Elder Abuse

www.ncea.aoa.gov

National Council on Aging (NCOA)

www.ncoa.org

National Resource Center on Supportive Housing and Home Modification

www.homemods.org

NAR Data Security and Privacy Toolkit

www.nar.realtor/data-privacy-security/nars-data-security-and-privacy-toolkit

National Adult Day Services Association

www.nadsa.org

Program of All-Inclusive Care for the Elderly (PACE)

www.npaonline.org

SAGE National Resource Center on LGBT Aging

www.lgbtagingcenter.org


http://www.hud.gov/program_offices/housing/sfh/hecm/hecmabou




http://www.lgbtmap.org/equality-maps/non_discrimination_laws


http://www.ageinplace.org/

http://www.nasmm.org/

http://www.ncea.aoa.gov/

http://www.ncoa.org/

http://www.homemods.org/

http://www.nar.realtor/data-privacy-security/nars-data-security-and-privacy-toolkit

http://www.nadsa.org/

http://www.npaonline.org/

http://www.lgbtagingcenter.org/

Resources

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U.S. Department of Health and Human Services: Administration on Aging

www.aoa.gov


www.gao.gov

Volunteer Match

www.volunteermatch.org

Weill Medical College of Cornell University, Department of Environmental

Geriatrics

www.environmentalgeriatrics.org

MAGAZINES AND EZINES On Common Ground

www.nar.realtor/on-common-ground

AARP Magazine


Grand Times Magazine

www.grandtimes.com

Reminisce Magazine

www.reminisce.com

Trailer Life

www.trailerlife.com

Senior Citizen Journal


The Senior Citizens Magazine

The Senior Citizens Magazine.com

Seniors Lifestyle Magazine

http://seniorslifestylemag.com

Today’s Caregiver

https://caregiver.com

http://www.aoa.gov/

http://www.gao.gov/

http://www.volunteermatch.org/


http://www.nar.realtor/on-common-ground





http://www.seniorcitizenjournal.com/

theseniorcitizensmagazine.com

http://seniorslifestylemag.com/

https://caregiver.com/


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BOOKS Age in Place: A Guide to Modifying, Organizing and Decluttering Mom and

Dad's Home

Lynda Shrager

AgeProof: Living Longer Without Running Out of Money or Breaking a Hip

Jean Chatzky

Disrupt Aging: A Bold New Path to Living Your Best Life at Every Age

Jo Ann Jenkins

From Age-Ing to Sage-Ing: A Revolutionary Approach to Growing Older

Zalman Schachter-Shalomi

Get the Most Out of Retirement: Checklist for Happiness, Health, Purpose, and

Financial Security

Sally Balch Hurme

The Gift of Years: Growing Older Gracefully

Joan Chittister

The Happiness Curve: Why Life Gets Better After 50

Jonathan Rauch

Happiness Is a Choice You Make: Lessons from a Year Among the Oldest Old

John Leland

How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won't Get

from Your Financial Advisor

Ernie J. Zelinski

Ikigai: The Japanese Secret to a Long and Happy Life

Hector Garcia

Natural Causes: An Epidemic of Wellness, the Certainty of Dying, and Killing

Ourselves to Live Longer

Barbara Ehrenreich

Neither Married Nor Single: When Your Partner has Alzheimer's or Other

Dementia

David Kirkpatrick

On the Brink of Everything: Grace, Gravity, and Getting Old

Parker J. Palmer

Resources

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Who Will Take Care of Me When I'm Old?: Plan Now to Safeguard Your Health

and Happiness in Old Age

Joy Loverde

Younger Next Year: Live Strong, Fit, and Sexy—Until You're 80 and Beyond

Chris Crowley

CONVERTING A SECOND HOME TO A PRIMARY RESIDENCE

According to NAR research, about one in four vacation-home owners intend to

use the property as a primary residence after retirement. What does this mean

for the SRES who is also a resort practitioner? The practitioner must be able to

help the buyer evaluate properties for both current and future use. For

example, during the years when a buyer is working or raising a family, a vacation

property may be used only for a couple of weeks during the year and rented the

rest of the time. As buyers reach retirement age, they may plan to spend more

time in the home or convert it to a year-round retirement residence.

A strategy for converting a rental home to a retirement residence is to purchase a second home and rent it aggressively using the rental income to offset as much of the mortgage and expense as possible. When the owner is ready to retire, the primary home may be sold and the proceeds used to refurbish the rental home, which then becomes the owner’s retirement residence. Or, the owner may sell both the primary and second home and use the proceeds to purchase a new home.

Buyers looking for a property in anticipation of retirement should carefully

consider how the home will fit their future lifestyle, income level, and savings.

For example, will the property still be affordable on a retirement income? Even

if the buyers are familiar with the area, all of their time there may have been

during the same season. Before they make a year-round commitment, especially

if they are purchasing a home in anticipation of retirement, a specialist should

encourage buyers to visit the area during both peak season and off season. This

provides firsthand experience of off-season living. Factors to consider include:

Will the weather be too cold or hot?

Will off-season road conditions hinder access?

Will peak-season traffic congestion be tolerable?

Will services and shopping facilities be available year-round?

Will there always be something interesting to do?

Will peak-season visitors be too noisy or disruptive?


222